The consideration for the company's acquisition of ASIC Technology was reduced by about 19.36%, which will effectively protect the interests of listed companies and shareholders and significantly reduce the risk of impairment of goodwill. The company's business scale will increase dramatically after the transaction is completed, and we are optimistic that this restructuring will bring synergy effects to both parties.

Incident: On the evening of September 6, the company released a significant asset purchase and related transaction report (draft) (revised). The transaction price of the underlying asset will be adjusted from HK$9.038 per share to HK$7.288 per share, and the total transaction consideration will be adjusted from HK$1.626 billion or HK$1.717 billion to HK$1.311 billion or HK$1.385 billion (considering dividend impact), a reduction of approximately 19.36%.

After the transaction is completed, the scale of the company's business will be greatly increased, and the price reduction will significantly reduce the risk of impairment of goodwill. After the completion of this transaction, the total assets of the listed company Asiatic Security for the full year of 2023 were 13.244 billion yuan (3.401 billion yuan before the transaction), the exam preparation operating income was 9.538 billion yuan (1.608 billion yuan before the transaction), and the net profit attributable to the mother was -0.205 billion yuan (-0.291 billion yuan before the transaction). The company's asset size and operating income will increase dramatically. Net profit and loss of earnings per share attributable to the owners of the parent company The margin has narrowed. This transaction will help listed companies improve asset quality, improve financial conditions, and enhance their ability to operate sustainably. Affected by the reduction in transaction consideration, after the transaction is completed, the amount of goodwill of the listed company and its share of net profit will be reduced from 0.856 billion yuan (249.10% of net profit) to 0.571 billion yuan (accounting for 159.44% of net profit). The impairment of goodwill will directly affect the operating performance of the listed company and reduce the current profit of the listed company. The reduction in the consideration of this transaction will significantly reduce the risk of impairment of the company's goodwill.

ASIC Technology's performance in the first half of the year is expected to bottom out, and it is optimistic that this restructuring will bring synergy effects to the two sides. According to ASIX Technology's 2024 mid-term report, the company's 2024H1 performance is under pressure, mainly affected by the sharp cost reduction and external environment of operator customers. The company will speed up BSS order business communication progress, mitigate the impact of order price pressure drop and signing delays, seize “AI+” and other technology upgrade opportunities, actively participate in joint customer research and development, and further increase cost control efforts while driving revenue trends improvement. The first half of the year's performance is expected to bottom out. Through this transaction, CICA Security will further build a competency system that “understands the Internet, understands the cloud, and understands security”, enhance the integration capabilities of “cloud network security”, extend and enhance the company's overall solution capabilities. After the transaction is completed, the two sides are expected to achieve collaborative development in various key information infrastructure industries such as telecom operators, while cooperating in sharing business opportunities and cross-selling, which will have a positive effect on expanding the business of listed companies and enhancing their ability to operate continuously.

Maintain an “overweight” investment rating. The company's performance has improved steadily, and the process of holding ASIC Technology continues to advance, and the security layout of the big model+satellite internet+computing power computing network continues to be implemented. The company's net profit to mother for 24-26 is expected to be 0.031/0.108/0.178 billion yuan, maintaining the “increase in holdings” rating.

Risk warning: Industry competition intensifies, demand falls short of expectations, and policies fall short of expectations.