Recently, the company issued an announcement "on the share transfer Agreement of Shenzhen Mingjiahui Technology Co., Ltd.". The comments are as follows:
With the strategic investment of China emerging Group, the controlling shareholder and actual controller of the company plans to transfer its 3924 million shares to China emerging Group through agreement, accounting for 11.38% of the total share capital of the company. After the change, Mr. Cheng Zongyu is still the controlling shareholder and actual controller of the company. The transferee of this agreement, China Xinxing Group, is a wholly owned subsidiary of General Technology Group. in terms of military industry, Xinxing Group has unique advantages in the construction of national and military key projects. In terms of foreign projects, he has the qualification for general contracting of complete sets of foreign aid projects and foreign aid materials projects, has long shouldered the important task of foreign assistance and construction of the Chinese government and army, vigorously implemented the strategy of "going out", and deeply participated in the construction of "Belt and Road Initiative". The total turnover of international project contracts has reached 11 billion US dollars, and international production capacity cooperation projects have been implemented with more than 20 countries and regions around the world. Xinxing Group as the second largest shareholder, the background of central enterprises superimposed excellent advantages in military industry, foreign engineering and logistics, the company's strength is expected to enhance.
Cooperation is good for the company and major shareholders, and the implementation of the "one core and two wings" strategy is smoother. The transfer consideration is 666 million yuan, and the relevant funds will be used to buy back pledged shares in advance, which will reduce the proportion of equity pledge by 9.13 percentage points. effectively solve the pledge risk and pressure of the company's major shareholders. As a large construction enterprise, the transferee company has relatively sufficient orders, which may bring high-quality orders for the company in the future, which will further promote the company's business development at home and abroad; Xinxing Group has strong military strength, and the parent company General Technology Group is an integrated service provider in the supply chain of mobile communication terminal products, with a complete network system and efficient operation and management capabilities. Combined with the company's "one core, two wings" strategy, the company's core traditional lighting engineering business may benefit from the lighting business increment brought by the emerging group's infrastructure housing construction and consolidate its leading advantage; smart street lamp business will benefit from the leading position of general technology in the distribution of mobile communication terminal products, and with the deepening of 5G construction, the company is expected to take the lead in smart city construction.
The balance sheet has a good ability to expand
The agreement benefited from a steady increase in 2018, with the company's 2019Q1 asset-liability ratio of 41.32%, a significant decline from the same period last year. The company's 2019Q1 revenue was 262 million yuan, an increase of 71%, and a net profit of 70 million yuan, an increase of 105%, continuing the high growth rate in recent years. It is expected that with the initial project rebate in first-and second-tier cities gradually in place, through the introduction of strong support from China emerging groups in terms of capital, large-scale project development and management capabilities, as well as the company's future issuance of shares and targeted convertible bonds to hold Yongqi Lighting, an enterprise in the same industry, and actively explore and carry out diversified financing methods of financial leasing business so that the company's balance sheet will maintain a good ability of expansion.
Investment suggestion
The signing of this agreement is an important step in the company's strategic development plan of "one core and two wings". By making use of the high-quality resources of central enterprises, to promote the development of traditional lighting engineering, and with the help of the general technology group mobile communication terminal products supply chain integrated service provider status advantage, vigorously develop the intelligent street lamp industry; in addition, the company controls Yongqi lighting in the same industry, the business development ability is enhanced, and future performance growth is expected. We maintain the "buy" rating. Due to the lower gross profit margin and net profit growth rate in 2019, we correspondingly cut the gross profit margin in 2019. As a result, the net profit growth rate is also reduced due to the decline in the base. The forecast net profit for 2019-2020 is 506 million and 765 million respectively (the original forecast net profit is 608 million and 923 million). The net profit for 2021 is increased by 1.068 billion, corresponding to 0.77,1.17,1.63 yuan per share. The PE is 13, 8 and 6 times, respectively, keeping the target price unchanged, corresponding to 11.78 yuan per share after transfer.
Risk hint: the growth rate of investment in fixed assets is accelerating downward, and the progress of cooperation between the two sides is not as expected.