[Incident] Guolian Securities announced that it plans to acquire 99.26% of Minsheng Securities shares by issuing A shares at a transaction price of 29.492 billion yuan; it intends to issue 2.64 billion shares, accounting for 48.25% of the share capital of the listed company after issuance. At the same time, the company also plans to issue shares to no more than 35 specific investors to raise supporting capital, and the total amount of supporting capital raised will not exceed RMB 2 billion.
Integration is progressing steadily. On March 15, 2023, Guolian Securities shareholder Guolian Development Group auctioned off 30% of Minsheng Securities shares. On May 14, 2024, the company announced that it plans to issue new shares at 11.31 yuan/share to pay transaction consideration, purchase 100% of Minsheng Securities's shares, and raise no more than 2 billion yuan through a fixed increase to develop the Minsheng Securities business. The main changes in the restructuring plan announced in August compared to the May 2024 plan are: 1) the total repurchase and free withdrawal of 10.9583 million shares in the Minsheng Securities share incentive plan due to employee turnover, retirement, and voluntary withdrawal; 2) Oceanwide Holdings withdrew from the transaction (holding 0.74% of shares); 3) after 2023 profit distribution, the issue price was adjusted to 11.17 yuan/share.
The main indicators of Guolian Securities are expected to enter the top 30 after the acquisition. According to Wind data, the main indicators of Guolian Securities and Minsheng Securities ranked around 40th in 2021-2023, and their overall strength is comparable. If simply added up, the total assets of the company will reach 150 billion yuan after the merger, and various rankings are expected to increase dramatically. In 2023, the League of Nations and Minsheng's revenue ranked 42nd and 32nd respectively, net profit ranked 38th and 40th respectively, and total assets ranked 32nd and 44th respectively. After the merger, the NLD will rank 25th, 28th, and 23rd in terms of revenue, net profit, and total assets.
Business complementarity is strong, and the strength of investment banking and brokerage business will be further enhanced. The investment banking and brokerage business is the dominant business of Minsheng Securities. In 2023, Minsheng Securities completed share underwriting of 31.8 billion yuan, ranking 8th in the industry, and Guolian Securities completed underwriting of 4.4 billion yuan, ranking 31st in the industry; in 2023, Minsheng Securities achieved investment bank revenue of 2.1 billion yuan, which is 4.3 times that of the League of Nations Securities. It is expected that the shortfall in the investment banking business of Guolian Securities will be filled after the acquisition. In terms of brokerage business, Minsheng Securities achieved brokerage revenue of 0.898 billion yuan in 2023, ranking 33rd in the industry, higher than the 51st place of the League of Nations Securities. As of the end of 2023, Minsheng Securities had 44 outlets, 25 of which were located in Henan; Guolian Securities had 86 branches and 56 were located in Jiangsu. There are differences in dominant regions, which is conducive to further optimization of the Guolian Securities branch layout.
The transaction raised 2 billion yuan of supporting capital, which was all increased to Minsheng Securities. After the capital increase, it was used to develop the Minsheng Securities business. Specifically, no more than 1 billion yuan is spent on wealth management business. The purpose is to enhance wealth management professional service capabilities, build a service ecosystem, optimize network layout, and enhance brand image. No more than 1 billion yuan will be spent on information technology. The purpose is to consolidate the scientific and technological foundation, strengthen the construction of a digital center, continue to promote application product innovation, and strengthen scientific and technological empowerment.
[Investment Proposal] The company's 2024-2026E EPS is expected to be 0.25, 0.27, and 0.28 yuan respectively, with net assets of 6.46, 6.67, and 6.91 yuan per share, respectively. Referring to the valuation level of comparable companies, we gave it 2024E2.0-2.1x P/B, corresponding to a reasonable value range of 12.92-13.57 yuan/share, maintaining a “superior to market” rating.
Risk warning: Trading volume continues to decline, and investment returns continue to decline due to increased equity market fluctuations.