Main points of investment:
Event: on January 20, 2017, Qinshang Optoelectronics issued an announcement. It reached an intention to acquire shares with Beijing concave-convex Education Consulting Co., Ltd. (hereinafter referred to as "concave-convex Education") and Changsha Siqi Education Consulting Co., Ltd. (hereinafter referred to as "Siqi Education"). The company intends to increase capital and / or acquire no less than 10% equity in concave-convex education in the form of cash, with a pre-investment valuation of 260 million yuan; it intends to increase capital and / or acquire no less than 10% equity in Siqi education in cash. Siqi Education was valued at 600 million yuan before investment. After the completion of the initial shareholding, the future company plans to complete the acquisition of the remaining shares of Convex Education and Siqi Education by issuing shares or cash payment.
Equity alliance of high-quality teaching and training institutions, financial advantages under the continuation of educational extension. Concave-convex education is a national education group with direct operation, alliance and entrusted management. it is mainly engaged in personalized education in primary and secondary schools, tailoring education plans, training methods and integrating effective educational resources for the educated. Concave-convex education has a mature business model and educational philosophy, and is growing rapidly. This transaction will further consolidate the company's leading position in the field of personalized education. Siqi Education is a primary and secondary education and training institution, with cultural excellence, personalized education, international education and other business sectors. Siqi Education has a comprehensive layout in Hunan and Hubei, with more than 60 learning centers, and has a good teaching reputation and brand influence in Hunan and even the central and southern regions. this transaction will help the company K12 education to achieve rapid regional expansion. Combined with the previous mergers and acquisitions of Guangzhou Longwen and other enterprises, the company has further improved the layout in the field of K12 tutoring, so as to greatly enhance the company's comprehensive competitiveness in the private education industry and help the company to develop continuously, stably and rapidly.
The successful completion of the acquisition of Longwen, strategic investment and management capabilities, considerable financial strength. On August 1, 2016, the company's merger and acquisition plan for Guangzhou Longwen was approved by the Securities Regulatory Commission; on the 18th, the transfer of assets in Guangzhou Longwen was completed. In November of the same year, the company completed supporting fund-raising and equity payment. According to the quarterly report of 2016 and the company's fixed growth plan, we expect the company to have paper cash of more than 2.5 billion and an asset-liability ratio of less than 20% by the end of 2016. The company has sufficient refinancing capacity and can provide orderly financial support for extension development. After the completion of the merger and acquisition, Huaxia Life held 11.15% of the shares, making it the second largest shareholder of the company. Strong strategic investors join, can bring continuous project, management, investment support for the company. Since the company announcement in 2016, Qinshang Optoelectronics has announced plans to acquire Guangzhou Longwen, participate in British Education, acquire Red Hat, Eddie Education and so on. The company's capital strength and executive ability are the well-deserved benchmark in the transformation of education and extension of enterprises.
Investment advice and performance forecast: the company's merger and acquisition of Guangzhou Longwen into the K12 extracurricular tutoring market has accumulated a certain first-mover advantage. The company's capital and team strength are outstanding, and the executive power of epitaxial mergers and acquisitions is remarkable. The degree of industrialization of the education sector is constantly improving, the amendment of the people's Promotion Law has been examined for the third time, and the space for asset securitization of private education has been opened. Through mergers and acquisitions, the company is realizing the grafting of high-quality educational assets on the capital platform and actively embracing opportunities for the development of the industry. Excluding the target mergers and acquisitions except Guangzhou Longwen for the time being, we predict that the company's net profit from 2016 to 2018 is 133 million yuan, 260 million yuan and 328 million yuan respectively, and the corresponding EPS is 0.09,0.17,0.22 yuan respectively. Considering the rising valuation of the education industry as a whole, the solid fundamentals of the company's traditional main business, the smooth landing profitability and growth of the merger and acquisition of Guangzhou Longwen, and the recent continued extension of the company is expected to bring a large increase in profit level, we give the company 80 times PE in 2017, corresponding to the target price of 13.6 yuan, buy rating.
Risk tips: extension layout is not as expected, extracurricular tutoring market risk and so on.