Core viewpoints

Hejie, a holding subsidiary, owns the only piece of land in Guangzhou's Nansha free trade zone that is located in the bonded zone, and resources are extremely scarce and cannot be replicated: the site is an asset injected by Guangxin Holdings, a major shareholder, in 2013.

A free trade zone refers to a trading zone designated by the state, which is more preferential than the relevant provisions of the WTO, allowing foreign goods to enter and leave without tariff exemption. The bonded area is an area set up by the customs or approved and registered by the customs, supervised and managed by the customs, which can store commodities for a long time. Therefore, the land warehousing and logistics value of the bonded area located in the free trade zone is very high, and the resources are scarce and can not be copied. We expect these resources to attract cross-border e-commerce companies such as Tmall International and Jumei (JMEI.N) to move in.

Guangxin Holdings, a major shareholder, is a forerunner in the reform of state-owned enterprises in Guangdong Province: research shows that Guangxin Group attaches importance to capital securitization, and the former chairman of Buddha Plastics has been transferred to Guangxin Group as general manager. Recently, Guangzhou has issued the opinions of the Municipal Party Committee and Municipal Government on comprehensively deepening the Reform of State-owned Enterprises, in which it has become a consensus to improve the asset securitization rate and concentration of state-owned assets and to gather state-owned assets in key areas and advantageous industries. According to the progress of the reform of state-owned enterprises in Guangzhou, the asset securitization rate will rise from 20% to 70%, and will exceed 70% in 2017.

Equity incentives were quickly approved by the Guangdong State-owned assets Supervision and Administration Commission, coupled with frequent recent reform measures. the foundation for the reform of state-owned enterprises is solid: the draft equity incentive submitted by the company on April 28 was quickly approved by the State-owned assets Supervision and Administration Commission of the Guangdong Provincial people's Government on June 4, with the injection of Hejie by major shareholders in 2013 and the acquisition of industrial chain by raising funds in mid-April. On May 26, it was announced that the holding subsidiary had set up cross-border e-commerce, indicating that the company had laid the groundwork for restructuring.

The reduction of Foshan Fushuo Hongxin Investment Co., Ltd., the second largest shareholder, which was held by the old management before Guangxin Holdings, the current major shareholder, is not necessarily related to the future development prospects of Fozhou Plastics. Foshan Fushuo Hongxin Investment Co., Ltd., the company's second largest shareholder, reduced its stake by 6.6 million shares, accounting for 0.628% of the total share capital. The survey shows that Fushuo Hongxin bought shares in the management of Lao Fushu, which is basically no longer in the actual operating position, and has been reducing its holdings in the past few years, which is not necessarily related to the future development prospects of Fushuo.

We reiterate our view that we strongly look at Dover plastic technology, based on: (1) Cross-border e-commerce is fermenting, and the company owns the only bonded area in Nansha, Guangdong, which is located in the free trade zone, and its resources are scarce and can not be replicated. it is very attractive to cross-border e-commerce such as Tmall International and Jumei. (2) the foundation for the reform of state-owned enterprises has been consolidated. Guangxin Holdings, a major shareholder, is the forerunner of the reform of state-owned enterprises in Guangdong Province. The company's equity incentives have been quickly approved by the Guangdong State-owned assets Supervision and Administration Commission, and recent reform measures have been taken frequently. it shows that the company has laid the groundwork for restructuring; (3) the valuation has a safe margin, and the first exercise period of stock options is 24 months later, while the exercise price is only 59% lower than the current market price.