Summary of the report:
The company adjusted its acquisition plan for Calient, and the acquisition ratio was reduced to 51%. On August 17, 2017, the company worked with CALIENT Technologies, Inc. It has signed the merger Agreement and Plan, which intends to acquire 51% of the shares of the target company by way of company merger. The company plans to set up a project holding company (Chunxing Lightspeed Ltd.) and a merged subsidiary 1 through its American subsidiary "Chunxing America"; the project holding company will have a middle-tier company and a merged subsidiary 2 under the middle-tier company. After that, the merger subsidiary 1 and the target company merge for the first time, and the target company absorbs and merges the merger subsidiary 1. After the completion of the transaction, the company will indirectly hold 51% of the target company through the project holding company, while the qualified shareholders of the target company will indirectly hold 49% of the target company through the investment entity and the project holding company.
The consideration for this transaction is US $148 million, with an advance payment of US $100 million, and the remaining price is calculated by installments based on the proportion of EBITDA realized in 2018 and 2019.
Aiming at the data center market, the Calient optical switching market has a good prospect. Calient is a provider of optical switching equipment based on 3D MEMS technology. The iconic product is the all-optical switching that can realize 320 × 320 any port. Calient holds more than 60 patents for 3D MEMS optical switching technology, which replaces traditional electrical switching equipment and greatly improves the switching speed. It is the core device of high-speed all-optical network in large data centers. With the arrival of 40G/100G optical network, Calient has a broad development prospect in the future.
The acquisition business has not yet been released, and the results are under short-term pressure. The company released its performance report for the first half of 2017, with revenue of 1.469 billion yuan, an increase of 22.13% over the same period last year, and net profit of 48 million yuan, down 47.83% from the same period last year. The decline in net profit is mainly due to the fact that the capacity utilization of the company's series of acquisition and new businesses has not been fully utilized, and the financial expenses have increased significantly, which has affected the company's profitability to a certain extent.
Profit forecast and investment advice: although the company's short-term performance is under pressure, but the epitaxial acquisition of Calient has great potential, it is recommended to pay attention to. We expect the company's net profit from 2017 to 2019 to be 110 million, 148 million, 186 million, EPS 0.10,0.13,0.16 yuan respectively, the current stock price corresponding to the dynamic PE is 99 times, 74 times and 59 times, maintaining the "overweight" rating.
Risk hint: the effect of the acquisition project is not as good as expected; the release of production capacity is not as expected.