Incident: Through its subsidiary, Orekin plans to issue a comprehensive offer to all COFCO Packaging shareholders at an offer price of HK$7.21 per share to purchase all of COFCO Packaging's issued shares in cash. The overall transaction consideration limit is HK$6.07 billion, or approximately RMB 5.52 billion. On June 6, 2024, Mr. Zhang Wei (holding about 22.01% of COFCO Packaging's shares) entered into an irrevocable commitment with the offender. Mr. Zhang Wei unconditionally and irrevocably agreed and promised to accept the offer for all COFCO Packaging shares before the final acceptance date of this offer, and promised not to withdraw the acceptance.
Strong alliances are expected to enhance customer service capabilities and help steady growth in performance. In 2023, Orekin and COFCO Packaging had total assets of 16.41 billion yuan and 14.24 billion yuan respectively, with net assets of 8.73 billion yuan and 5.56 billion yuan respectively, and operating income of 13.84 billion yuan and 10.27 billion yuan respectively. After the transaction is completed, the listed company Orekin is expected to use COFCO Packaging's good management system to further improve the layout of various functions such as R&D, production and sales, expand its product portfolio, enhance its ability to serve customers, and its performance is expected to achieve steady growth.
In the medium to long term, the competitive pattern of two-piece cans in the Chinese market is expected to improve markedly. In 2022, the market share of Orekin, Baosteel Packaging, COFCO Packaging, and Shengxing Co., Ltd. in the two-piece can market in China was 22%, 18%, 17%, and 15%, respectively. If the deal is implemented, Orekin's market share will further increase, and the optimization of the two-piece can industry pattern is expected to improve the overall profit level of the industry.
Profit forecast and rating: The company is a leader in the metal packaging industry, serving well-known brands such as Red Bull, Budweiser, Tsingtao Brewery, and Feihe for a long time, providing customers with customized and integrated packaging solutions. Strategic customer cooperation is stable, and the company's performance in the second quarter is expected to maintain steady growth under peak season catalysis. The net profit for 2024-2026 is expected to be 950 million yuan, 1.08 billion yuan, and 1.19 billion yuan respectively. The corresponding PE is 12x, 11x, and 10x, maintaining the company's “recommended” rating.
Risk warning: Risk of high customer concentration, risk of fluctuating raw material prices, certain uncertainty in transactions, increased industry competition, etc.