The current situation of the company
On May 22, 2022, the company issued a major asset purchase report (draft), which proposed to buy 51% of the shares held by Shi Zenghui, Lin Chenbin and Lin Liju with 816 million yuan in cash. In 2021, the operating income of Ningde Dongheng (hereinafter referred to as "the underlying company") and the net assets sold this time exceeded 50% of the company's relevant targets, so this transaction constitutes a major asset restructuring.
Comment
The target company cooperates closely with Ningde era, with high business growth and high profit level in the past two years. Ningde Dongheng was established in 2014, and its main products are precision structural components of new energy power batteries. In 2014, the target company cooperated with Ningde Times to provide it with module side plates, module end plates, module crimping components and other structural components. Ningde era contributed more than 90% of the company's total revenue in 2021. In 2020 and 2021, the company's income was 414,000,000 yuan, the gross profit margin was 29.7%, the net profit was 28.9%, and the net profit rate was 14.9%, 15.7%, and the profit margin in 2021 was higher than that of Shanhui Technology.
Mergers and acquisitions are expected to lead to a significant thickening of EPS. If the transaction is completed, the company's test preparation income and return net profit will increase by 82% and 101% in 2021, while driving the increase in EPS from 0.93 yuan to 1.86 yuan in 2021. In addition, Ningde Dongheng's performance commitment for 2022-2024 net profit of not less than 150.16 billion yuan, and set up a performance compensation mechanism. At the same time, 30 per cent of the excess profits realized shall be taken as excess performance rewards, with a maximum of no more than 163 million yuan.
The growth prospect of new energy vehicles is broad, and there is more room for the growth of lithium materials. Since the second half of 2020, the sales of new energy vehicles and the installed capacity of power batteries have shown a trend of rapid growth. In the context of global carbon neutralization, we believe that there is still much room to improve the permeability of new energy vehicles, which will lead to an increase in the demand for lithium-ion materials. The target company earlier carried out strategic cooperation with the battery leader Ningde era, the customer stickiness is strong, we believe that will fully benefit from the growth of the industry.
Give full play to customer synergy and transform to "equipment + products". Both the company and the target company take the Ningde era as the big customer, and the two customers are highly coordinated. The company is expected to strengthen the customer service ability and open the growth ceiling. In addition, the company's original business is module, PACK automation production line, customized equipment. The lithium battery structure is made of lithium battery materials, and the demand is ultimately linear with the sales of new energy vehicles. We believe that this merger is expected to enhance the stability of the company's business demand.
Profit forecast and valuation
Considering that the transaction has not yet been completed, we maintain the 2022 EPS 2023 forecast of 3.05 pound 5.74 yuan. The company's current share price corresponds to 2022 25.7x/13.7x PE 2023. We maintain the target price of 121.90 yuan, corresponding to 2022 40.0x/21.2x PE 2023. There is 55% upside to maintain an outperforming industry rating.
Risk
The implementation of M & An integration is not up to expectations.
