Event: on June 26, 2013, the company announced that the asset restructuring plan planned by the company on June 3 was terminated. The plan is to issue additional shares to the existing shareholders of Dalian Liancheng CNC Machinery Co., Ltd. (hereinafter referred to as Dalian Liancheng) to acquire 100% of Dalian Liancheng shares, and said that no major asset restructuring will be planned within 3 months from the date of the announcement.

Comment

The company is currently in the stage of digesting inventory, increasing income without increasing profits. The company's first-quarter operating income was 113.657 million yuan, up 169.5% from the same period last year; the operating profit was 16.29 million yuan, down 2.5% from the same period last year; and the net profit belonging to shareholders of listed companies was 10.63 million yuan, up 25% from the same period last year. At the same time, the price of photovoltaic products such as wafers and batteries remained weak in the first quarter, while the company's inventory reached 344 million yuan in 2012. From these data, the company's strategy is to deal with products at a low price, hoping to digest these unprofitable inventory as soon as possible. The company has also said it will take various measures to digest some of its inventory in 2013. Therefore, the company's performance in the first quarter showed an increase in income without profit. The prices of photovoltaic wafers, batteries and other products still did not improve much in the second quarter (despite a certain rebound), but with the launch of the domestic market, photovoltaic prices are expected to be relatively better in the second half of 2013. In spite of this, the company's photovoltaic products are relatively single, cost control is not strong enough, and the situation of increasing income without increasing profits may continue to the third quarter.

The planned reorganization is intended to enter the upstream high-end equipment in order to break the single situation of the product. The asset restructuring plan planned by the company is to issue additional shares to the shareholders of Dalian Liancheng Company to acquire 100% equity in Dalian Liancheng. Dalian Liancheng Co., Ltd. was founded in 2007, mainly engaged in photovoltaic and semiconductor industry equipment R & D and manufacturing, the main products include silicon cutting square, fragments, slicing and other types of multi-wire cutting equipment, among which single and polycrystal multi-wire cutting machine products have strong competitiveness. The annual production capacity of multi-wire cutting machine is 500 sets. From the point of view of the business of the acquisition object, the company wants to enter the sub-industry with high technical content and technological competitiveness of crystal silicon cutting equipment through the acquisition of Dalian Liancheng, so as to break the current situation that the existing products are too single and low added value, so as to achieve transformation.

There is a high risk of uncertainty in the development of new products. In addition to achieving a breakthrough through the acquisition of high-quality assets, the company is also developing resin diamond line projects and MOCVD equipment, and has invested a lot of R & D expenses, accounting for more than 33% of the R & D expenses in 2012. Although the demand in the downstream market is expected to pick up compared with last year, there is a lot of uncertainty, so it is impossible to form a new profit growth point in the short term, and the company's transformation faces a lot of challenges.

Give the company a "neutral" rating. Considering that the company is in a period of transition, there are many difficulties in improving its main business in the short term. In addition, the failure of the restructuring plan is disadvantageous to the transformation, so it will bring greater adjustment risk to the company's stock price in the short term. Taken together, we give the company a "neutral" rating.