Key points of investment
It is proposed to acquire Vientiane Xindong, and the digital marketing layout continues to improve. 1) The company plans to acquire the mobile marketing company Vientiane Xindong, with a transaction price of 560 million yuan. It promises that the net profit of 2016/17/18/19 after deducting non-return mothers will not be less than 4,000/5200/6760/7774 million yuan respectively. The corresponding purchase price of PE for each year is 14/11/8/7 times, respectively, and plans to raise 245 million yuan in supporting capital. 2) Vientiane Xindong is a rapidly growing mobile marketing company with a self-developed DSP/DMP platform and rich channel/customer resources. 2016H1 achieved revenue of 121 million yuan (77% from precision marketing) and net profit of 16.91 million yuan.
Steadfast transformation, excellent target performance. 1) The company's original main business was LED manufacturing. In 2015, it made a strong entry into the digital marketing industry through “two controls and one participation” (holding Dingsheng Yixuan, Yiwang Wireless, participating in Botu advertising). 2) The performance of Billian Wireless was impressive. In 2015, it promised a net profit of 25 million yuan. If performance rewards for executives were not distributed, the net profit would exceed 42 million yuan, and the completion rate would exceed 165%.
The “one horizontal, one vertical” digital marketing strategy is clear. Lay out five tracks horizontally: creative planning (Botu advertising) +channel delivery (Dingsheng Yixuan/Billian wireless) +data mining (Vientiane Xindong DMP) +programmatic purchasing (Vientiane Xindong DSP) +media resources; digging deep into vertical segments (Dingsheng Yixuan focuses on the home decoration industry). Horizontal and vertical integration can cover the entire upstream and downstream industrial chain.
Profit forecasts and ratings. The company's net profit for the 2016/17/18 exam preparation was 2.07/254/294 million yuan respectively. The share capital raised was 846 million shares, the diluted market value was 12.5 billion yuan, and the fully diluted EPS was 0.24/0.30/0.35 yuan. The PE corresponding to the current stock price for each year was 64/52/45 times, respectively. We believe that the company's “vertical and horizontal” digital marketing industry layout strategy is clear. With the gradual improvement of the industrial ecosystem, valuation is expected to be further optimized. Maintain an “increase in holdings” rating.
Risk warning: acquisitions fall short of expectations, macroeconomic downturn, industry policy risks.