The company plans to acquire 70.1441% of Haichanghua's shares with RMB 580 million in cash. The acquisition aims to expand the scale of the company's capacity, increase its market share, and improve the company's capacity structure. Through this acquisition, the company will enhance its capabilities in the transportation of refined oil products and chemicals along the domestic coast and in the middle and lower reaches of the Yangtze River, further expand its business, and enhance its market competitiveness.
The target company, Haichanghua, is in good financial condition, and the acquisition premium is relatively low. The target company, Haichanghua, currently has 4 domestic chemical ships and 8 domestic refined oil products ships, with a total capacity of 106,600 tons. In 2023, Haichanghua achieved operating income of about 386 million yuan, net profit after deducting non-recurring profit and loss of 21 million yuan, and annual net loss of -32 million yuan. As of the end of 2023, Haichanghua's net worth was 614 million yuan. Haichanghua's assets have a book value of 732 million yuan, an assessed value of 945 million yuan, assessed value-added of 212 million yuan, and a value-added rate of 29.02%. The total liabilities were $118 million. Among them, fixed assets (ships) mainly generate revaluation and appreciation, which is also in line with the current market situation. Based on the evaluation reference date, Haichanghua's total shareholders' equity value was 827 million yuan. At the same time, the transaction consideration also included the additional capacity of four ships of refined oil products obtained by the acquirer by replacing the capacity of 3 million yuan/ship of the acquired target company, for a total of 12 million yuan.
It is expected that after the acquisition is completed, the company's capacity will increase significantly. Through this acquisition, the company's capacity has been greatly increased and is expected to increase by 33%. As of the first quarter of 2024, the company controlled 40 ships, with a total capacity of 298,800 DWT (24 ships engaged in domestic chemical transportation, 14 ships involved in foreign trade chemical transportation, and 2 ships engaged in oil business); after reporting to Haichanghua, the capacity was increased to 52 ships, 398,800 DWT, with a capacity increase of 33.4% (the impact of capacity replacement was not calculated). With the arrival of a high-quality management team, I believe Haichanghua Shipping's profitability will improve.
Q2 The chemical transportation boom remains steady. Anderford continues to promote smart storage projects, and medium- to long-term growth can be expected. The chemical transportation market remained stable in the second quarter of 2024. In order to match ships and supplies, Shenghang Co., Ltd. is speeding up the adjustment of oil vessels and carrying out foreign trade chemical transportation business. There are 8 oil tankers in the Haichanghua fleet. Shenghang Co., Ltd. plans to allocate them flexibly according to market demand to maximize resource utilization and enhance operational efficiency and competitiveness.
Investment suggestions: 1) The completion of the acquisition increased the company's chemical transportation business capacity; 2) The transaction structure is relatively simple, and the asset evaluation premium margin is low. Considering the impact of the merger, the 24/25/26 results are expected to reach 236.287/338 million yuan, with a performance growth rate of about 30%/21%/18%. Maintain a “Highly Recommended” rating.
Risk warning: Acquisitions falling short of expectations, sluggish downstream demand, major safety incidents, etc.