On May 14, the company announced that it signed “Restructuring Investment Agreements” with 13 companies including Shengtai Group and their managers. It plans to obtain all the assets in the tire sector of the four companies of Shengtai Group, Shandong Zhuzhushenghua, Shandong Shengshi Tailai, and Qingzhou Derui Thermal Power through sales-style restructuring. The total price of this restructuring transaction was 1,108 billion yuan (including VAT).
Since it has been reviewed and approved by the company's board of directors and approved by the Guangrao County People's Court, the agreement has officially entered into force.
The integration of Bussan Chemical Shandong Tire has gone one step further. Due to industry cycle fluctuations, disorderly expansion, and mutual insurance issues, a large number of tire companies in Guangrao, Shandong have been in trouble since 2017. In this context, Bussan Chemical took advantage of its own rubber industry chain resources and integrated local tire companies such as Ogre, Hawke, Wan Xin, and Shengtai through leasing, trusteeship, joint ventures, and restructuring. Through supply chain operations, management and output, equipment upgrades, etc., these enterprises have gradually come out of the quagmire, and production capacity and profits have grown steadily. Shengtai Group has a total production capacity of 2.4 million sets of all-steel radial tires and 18 million sets of semi-steel radial tires. In addition to the already controlled pilot tires (formerly Hawk+Ogre), Bussan Chemical Holdings' tire production capacity will be close to 25 million sets after this acquisition. Furthermore, according to Kun Yuan's asset evaluation report, the underlying assets had a book value of 1,235 billion yuan and an assessed value of 1,574 billion yuan. The transaction price was reasonable. This integration has profoundly demonstrated the value and replicability of the vertical industrial chain of Bussan and Chemical Industries.
Deepen the “second mixed reform” and complete the first equity incentive since the overall listing. On April 16, 2021, the company's board of directors deliberated and approved the “2021 Restricted Stock Incentive Plan (Draft”), which was approved by the Zhejiang State-owned Assets Administration Commission and the shareholders' meeting. The plan is to grant 147 million restricted shares to 609 senior and middle level managers and core technology (business) cadres. The initial grant price is 3.14 yuan per share, further deepening the reform of state-owned enterprises.
Investment advice: We forecast the company's net profit of 37.12/39.38/4.601 billion yuan for 2021/22/23, and EPS of 0.73/0.78/0.91 yuan, corresponding to 6.9/6.5/5.6 times the current price of PE, maintaining the “buy” rating.
Risk warning: Economic recovery is lower than expected, asset disposal etc. are not fluctuating