Investment logic

The company changed from a single cement business to a private equity business, and its net profit and ROE increased by leaps and bounds. Under the industry+industrial capital model, it is expected to build a dual-core business of biotechnology+fund management in the future. At the beginning of its establishment, Sichuan Shuangma focused on cement products. After the company switched its strategic focus to private equity business, net profit to mother increased dramatically, from 0.085 billion yuan in 2016 to 0.985 billion yuan in 23. 2024H1 achieved net profit to mother of 0.113 billion yuan, or -75.06% year-on-year, mainly due to declining market conditions that dragged down investment income. The company's ROE increased from 3.16% in 2016 to 14.10% in 2023. Looking at the breakdown, the share of private equity investment profits increased year by year, from 0.361 billion yuan in 2018 to 0.852 billion yuan in 2023, and the share rose from 52% in 2018 to 86% in 2023.

The ability to systematize the recruitment, management and investment business is outstanding, building core competitiveness. 1) Business model:

The profit structure of the company's private equity business includes management reward+performance sharing+investment income.

2) Revenue structure: Management fee revenue has basically maintained 30% in the past three years. 2024H1 was 0.221 billion yuan, +81% year over year; 24H1 disclosed unconfirmed excess compensation of 1.16 billion yuan; 24H1 follow-up income was -0.079 billion yuan, which changed from positive to negative year-on-year, mainly due to the downturn in the market, which led to losses in the company's investment projects. 3) Investment direction: The company focuses on strategic emerging industries such as new industrialization, artificial intelligence, and biological manufacturing, and has rich investment experience in related fields. 4) Fundraising scale: The company has outstanding fund-raising capabilities, mainly due to a high level of investment management and risk control capabilities. Up to now, the amount of funds under management has reached nearly 28 billion yuan.

The company announced plans to acquire Shenzhen Jianyuan in October 24. Shenzhen Jianyuan has been deeply involved in the field of peptides for many years. The annual production capacity of peptide raw materials has reached several tons, and the largest single batch output of GLP-1 products is leading in the country. In the future, as the penetration rate of GLP-1 drugs increases further and domestic manufacturers are successively approved for marketing GLP-1 drugs, demand for GLP-1 drug raw materials such as simeglutide is expected to continue to increase. As of 24/6/30, Shenzhen Jianyuan had revenue of 0.216 billion yuan and net profit of 0.062 billion yuan.

Profit forecasting, valuation, and ratings

The company's shareholders have a strong background and rich investment experience in the high-tech sector. Although short-term results are being dragged down by investment, subsequent IPOs are expected to rebound and the new merger and acquisition policy will benefit the company's private equity business. At the same time, considering that Shenzhen Jianyuan is expected to increase profits after merging, we expect the company's net profit to be 0.352/0.651/0.954 billion yuan in 2024/2025/2026, respectively, -64%/+85%/+47% year-on-year. Overall, the company was valued at 17 billion yuan in 2025, and the corresponding target price was 22.27 yuan, which covered the “buy” rating for the first time.

Risk Alerts

1. Risk of fluctuations in the fair value of investment projects; 2. Investment project withdrawal progresses less than expected; 3. Risk of weakening demand in the building materials market; 4. Private equity business performance prediction methods may have limitations.