The controlling shareholder fully subscribed and issued an additional 461 million yuan
The company announced plans to issue a total of 56.5 million new domestic shares at a subscription price of about RMB 8.16 per share (equivalent to about HK$918, 10-day average price) in cash to raise about RMB 461 million. After the domestic stock subscription was completed, the direct shareholding of Chairman Liu Xin and the concerted actors increased from 38.1% to 41.2%.
This increase will further reduce the balance ratio while also conveying confidence to the market. In addition, the company originally had 165 million domestic corporate shares and 164 million H shares. After the issuance, domestic corporate shares were expanded to 221 million shares, with a total share capital of 385 million shares. The share capital increased by 17%, and weakened EPS by 15%.
Strategic cooperation with Auto Superman
On March 26, the company collaborated strategically with Auto Superman (more than 10,000 stores nationwide), a subsidiary of Jingu Co., Ltd. (002488), and released an important new product this year, the AIT automotive full system artificial intelligence testing terminal. The cooperation model between the two parties is: Auto Superman will help Yuanzheng Technology sell AIT equipment, and Yuanzheng Technology will share the data revenue generated by AIT with Auto Superman.
Release of AIT automatic detection equipment
The company released a new heavyweight product: AIT automatic inspection equipment. AIT is an abbreviation for artificial intelligence detection, and the device is characterized by being small and intelligent. It doesn't have a single button in its entirety. The user (the target is a car wash shop and quick repair and maintenance shop), plug it into the car's OBD socket, and in 3-5 minutes, a full vehicle physical examination report will be generated on WeChat. This service is a paid service. The price is determined uniformly by users according to service requirements. It ranges from 10-50 yuan/time. The revenue share is 40% for Yuanzheng Company and 60% for stores.
AIT products are epoch-making: 1) It is the world's first smart car diagnostic device; 2) it pioneered the automotive data service industry; 3) End users can keep abreast of automotive problems; 4) There is still huge room for added value in the future of data.
In addition, the company also released a handheld professional automobile fault diagnoser for all HTT models. The sales price of this equipment is about 10,000 yuan. It can detect more professional heavy truck equipment, as well as the EV17 automobile emissions handheld testing terminal, the EVIN police vehicle inspection terminal.
Investment advice
We forecast that the company's net profit will reach 84.7 million yuan in 2017 and 170 million yuan in 2018. Considering the dilution of the share capital after the increase, it corresponds to HK$0.25 or HK$0.50 EPS. Given that the company is a data service provider in the automotive sector, has a leading position, and there are expectations for new business, we maintain a reasonable valuation of 14 yuan for 6 months, corresponding to a price-earnings ratio of 28 times in 2018.
Risk warning
The pullback pressure that may be brought about by a rapid rise in short-term stock prices;
Sales of new products fell short of expectations;
Some overdue receivables may put pressure on bad debts.
