This report is read as follows:
The further acquisition of Sitan Instruments at the bottom of the industry by 57.19%, judging the probability of merging tables in 2017, will significantly thicken the company's performance; the capital expenditure of the three major oil companies will directly benefit from the increase in capital expenditure of the three major oil companies.
Main points of investment:
Conclusion: the company plans to acquire 57.19% equity in Stan Instruments with 457 million cash, and the acquisition of high-quality assets at the bottom of the industry, judging the probability of 2017, will significantly increase the company's performance. The EPS for 2017-2019 will be maintained at 0.07max 0.15 EPS 0.24 yuan; assuming the acquisition is completed, the pro forma net profit will be 0.66 pm 1.02 / 140 million yuan, and the pro forma EPS will correspond to 0.17 pm 0.27 max 0.36, and the target price will be maintained at 14 yuan to increase the holding.
Further acquisition of Sitan Instruments 57.19% stake, significantly thickening the company's performance. ① plans to buy 57.19% of Sitan Instruments with 457 million yuan in cash; the underlying 100% equity is calculated at a valuation of 800 million yuan, corresponding to about 11 times PE in 2017, which is reasonable. ② Sitan Instruments has promised to deduct non-net profits of not less than 7000,0000.85 million yuan respectively in 2017-19; this acquisition constitutes a major asset restructuring, which needs to be approved by the shareholders' general meeting, and the procedure is relatively simple, with a high probability of being able to merge in 2017, while Stein Instruments' profits are mainly settled in Q4, and the statement will significantly increase the company's net profit. ③ Sitan instrument has excellent texture and is the largest manufacturer of specialized instruments such as well logging and well testing in China. The revenue volume of Sitan Instruments is similar to that of the company, with a gross profit margin of about 60% and a non-net profit margin of 21%, with strong profitability.
Sitan Instruments directly benefited from the increase in capital expenditure of the three major oil companies. ① OPEC cut production to boost oil prices, the three major domestic oil companies raised capital expenditure, ending the trend of spending reduction in recent years, and the industry bottomed out. The main customers of ② Sitan Instruments are Petrochina Company Limited and China Petroleum & Chemical Corp, which directly benefit from the increase in capital expenditure of oil companies. With the decline of oil prices in recent years, the output of domestic oil fields has not decreased significantly in order to keep increasing production, and the company's performance is relatively less affected by oil price fluctuations. It is expected that the profitability of Sitan Instruments is expected to be further enhanced in the future as the global crude oil supply rebalances and oil prices recover.
Catalyst: the acquisition of the underlying assets was successfully completed.
Risk hint: the risk of acquisition failure and lower-than-expected capital expenditure of oil companies.