Main points of investment
Event: the company released the 2018 mid-term report, with operating income of 440 million yuan in the first half of the year, an increase of 59.0% over the same period last year, a net profit of 16.556 million yuan, and a profit of 0.03 yuan EPS.
Star Lake Science and Technology is a leading manufacturer of nucleotide and amino acid products in China. The company is a manufacturing enterprise with physical and chemical industry as the core technology, mainly engaged in food and feed additive business and biochemical raw material drug business. At present, the company has a production capacity of 10000 tons of nucleotide additives and 4094 tons of biochemical APIs and intermediates.
In the first half of the year, the company benefited from the rise in volume and price of Ivy G products, and its performance picked up. The company's operating income in the first half of the year increased by about 59% compared with the same period last year, in which the increase in sales volume and unit price of nucleoside products was the main reason for the rebound in the company's performance. In addition, the company's sales of fructose products also increased significantly compared with the same period last year. In terms of profitability, the company's medium-term gross profit margin was 22.8%, an increase of 7.6 percentage points over the same period last year, and the expense rate during the period decreased by 14.7 percentage points compared with the same period last year due to the sharp decline in management expense rate and financial expense rate. The company's management expenses decreased by 19.9% compared with the same period last year, mainly due to the fact that the wages, depreciation, utilities and other expenses of production personnel during the maintenance and shutdown period were included in the management expenses, while the financial expenses decreased by 51.7% compared with the same period last year. This is mainly due to the fact that corporate bonds have matured in July last year, the company's interest-bearing liabilities have decreased, and the company has repaid bank loans to reduce interest expenses.
Is promoting the merger and acquisition of Sichuan Jiuling Pharmaceutical Technology Co., Ltd. The company plans to buy 100% equity in Jiuling Pharmaceutical by issuing shares and paying cash, with a transaction price of 394 million yuan, of which the consideration paid by the issued shares is 256.1 million yuan and the cash consideration is 137.9 million yuan. The announcement said that the company intends to raise no more than 168 million yuan from non-public offerings of no more than 10 specific investors. Jiuling Pharmaceutical provides professional R & D and production services of pharmaceutical intermediates for downstream customers through CMO business and multi-customer product business. In addition, the non-return net profit promised in the terms of the performance compensation agreement signed by the other party and the company is not less than 3020 yuan, 3200 yuan, 3790 yuan and 43.5 million yuan respectively from 2017 to 2020.
Profit forecast and rating. Without considering the situation that the company issues shares to pay cash to purchase assets and raise funds, it is estimated that the EPS from 2018 to 2020 will be 0.09,0.18,0.26 yuan respectively. Maintain the "overweight" rating.
Risk hint: the risk that the company's performance falls short of expectations due to large fluctuations in the prices of raw materials and products, the risk of fluctuations in the company's performance caused by environmental factors, and the risk of M & A failure.