Event: on the morning of April 2, we conducted an on-the-spot investigation on Hubei Xiangyang May 25 pump Industry Co., Ltd., which was acquired by the company. We had in-depth exchanges with the chairman, general manager and other senior executives of the company on the company's recent business situation and development plan.
Core point of view: the non-public offering of Beihua shares does not exceed 77.9 million shares, and the issue price is not less than 7.12 yuan per share. The acquisition of 65.65% equity in the May 25th pump industry will inject high-quality assets into the company. After the implementation of the project, the performance of Beihua shares will be weakened periodically, and the profitability will be further improved.
Main points of investment:
Nitrocellulose leading scale advantage is obvious: Beihua shares are mainly engaged in nitrocellulose, TDI and other products. The company is the world's largest nitrocellulose producer with a total production capacity of 50,000 tons and a domestic market share of about 50%. In 2015, the company will produce 60, 000 tons of nitrocellulose per year, 30, 000 tons of nitrocellulose solution and 3000 tons of nitrolacquer chips.
The company has obvious advantages in technology and scale, and is the only domestic enterprise with the production capacity of wood pulp nitrocellulose to mainly digest cotton products besides supplying domestic demand, it has been exported to Southeast Asia, South Korea and the Middle East, Africa, North America and European markets.
The profit level of Beihua's original products is greatly affected by the periodic fluctuations of the industry: the company's operating income in 2012 was 1.547784 billion yuan, down 19.00% from the same period last year; the net profit was 13.8385 million yuan, down 57.93% from the same period last year; affected by the decline in the growth rate of the downstream industries such as real estate, automobile, ink and other industries, the demand of the nitrocellulose industry further declined, the global demand decreased by about 5%, and the domestic demand decreased by about 10%. The price of raw material cotton cashmere and refined cotton decreased greatly, and the product cost was high before and after low. The company actively stabilizes product prices, but it still shows a downward trend throughout the year, resulting in a year-on-year decline in gross profit margin and a substantial decline in operating efficiency.
The technology of 525 pump industry is leading: Xiangyang May 25 pump industry is the leading enterprise of flue gas desulfurization pump and chemical pump in China. At present, the production capacity of pump valve is about 5000 / year, the market share of flue gas desulfurization is 40%, and the market share of phosphate and compound fertilizer is 70%. The market share in the traditional alumina industry is 20%; with the continuous introduction of new products, the company has successfully entered the nuclear power market, and nuclear power super duplex stainless steel castings have been used in Taishan nuclear power project and Fangchenggang nuclear power project. The company's independent research and development of all its products is the only domestic desulfurization pump technology that can be exported.
The acquisition project injects stabilizers into the company's development: the company's products are mainly used downstream in thermal power plant desulphurization, phosphorus chemical, coal chemical, petrochemical and other industries. The demand for products is stable, and the comprehensive gross profit margin is more than 30%. In 2012, the operating income was 530 million yuan and the net profit was 64 million yuan. The company's new investment projects include slurry pumps for metallurgical smelting and ore mining and stripping, magnetic drive pumps for petrochemical applications and nuclear power castings. The slurry pump industry in China is developing rapidly, with a compound growth rate of about 15% in the past five years. The focus of the metallurgical industry is to implement the overall technical transformation of the industry as a whole to save energy, reduce consumption and reduce environmental pollution. As a result, the demand for high-efficiency slurry pumps has reached 8 billion yuan per year. Pumps used in the domestic petrochemical industry also provide a broad market space for the company. according to understanding, the demand for magnetic pumps can reach 3 billion yuan / year.
In addition, the May 25th pump industry has become a qualified supplier of non-nuclear centrifugal pumps for three domestic nuclear power construction companies, namely, China Nuclear Engineering, China wide Nuclear Engineering and China Power Haiyang Nuclear Power Co., Ltd. It is estimated that the annual market size of nuclear power pumps will reach 12 billion yuan, and the average annual demand for domestic nuclear equipment manufacturing materials and nuclear grade castings and forgings will be 2 billion yuan. With the gradual production of new projects and the continuous improvement of domestic environmental protection policies, the company has a broad market in the future. It is estimated that the pump industry will achieve a net profit of 80 million yuan and 100 million yuan from 2013 to 2014.
We expect the company to earn 0.32 and 0.45 yuan per share from 2013 to 2014 after the completion of the acquisition project, giving the company a "cautious recommendation" rating.
Risk hint: the risk of price fluctuation of raw materials such as cotton cashmere, refined cotton, nitric acid, alcohol, etc.; the new fund-raising projects are not up to expectations.