\u3000\u3 Guocheng Mining Co.Ltd(000688) 789 Hangzhou Honghua Digital Technology Stock Company Ltd(688789) )
Event: Hangzhou Honghua Digital Technology Stock Company Ltd(688789) announced that it plans to use its own funds or self raised funds to acquire 67% equity of Tianjin Jingli Digital Technology Co., Ltd. (Jingli digital) with RMB 67 million. After the completion of this transaction, Jingli digital will become a holding subsidiary of the company and is expected to form a goodwill of 46.85 million yuan.
Acquire ink manufacturers and enrich the upstream and downstream layout of the industrial chain: the target company Jingli digital is mainly engaged in the development and production of ink and ink, and the market segment is the textile printing market. The technical level is high, and has established a close cooperative relationship with the Binhai Industrial Technology Research Institute of Zhejiang University. It has high analysis, testing and R & D means to ensure to provide customers with high-quality inkjet color paste products and services. As an important ink outsourcing supplier of the company, thanks to the supply support of its advantages, the ink products of the company have the characteristics of high coloring rate, gorgeous color, wide adaptability of fabrics, high color fastness and less sewage discharge in the printing process. The quality of some products exceeds that of similar imported products.
The appraised value of the target company is 107 million yuan, with a net profit of 14.52 million yuan in 2021: Jingli digital achieved a revenue of 71.96 million yuan in 2021, a year-on-year increase of + 154.3%; The net profit was 14.52 million yuan, a year-on-year increase of + 152.2%; The net interest rate is about 20%. As one of the company’s ink outsourcing suppliers, its revenue growth is consistent with the company’s ink sales growth in 2021. The appraisal value of all shareholders’ equity of Jingli digital in this transaction is 106.73 million yuan, with an appraisal value-added of 89.55 million yuan and a value-added rate of 521.4%. The target company has many intangible assets that are not recorded in the book, including 7 patented technologies, 17 trademark rights, 11 computer software copyrights and 1 work copyright, which are expected to bring great benefits in the future.
To improve the self production rate of ink, the cost is expected to decline further: with the increase of the company’s market ownership of digital inkjet printing equipment, the sales scale of consumables and accessories represented by ink will continue to increase. In 2020, the company purchased 24.53 million yuan from Jingli digital, accounting for 5.48% of the company’s total procurement. This acquisition will help to improve the self production rate of the company’s ink, further reduce the ink production cost, enhance the company’s core competitiveness and enhance the company’s anti risk ability. In the first half of 2021, the company’s ink sales revenue reached 143 million yuan, accounting for 31.3% of revenue; The gross profit margin of ink was 45.8% in 2020, 4.5 percentage points higher than that of equipment sector. In the future, the company’s ink sales revenue and gross profit margin are expected to continue to improve, further consolidate the advantageous position of “equipment + ink” and expand market share.
Investment suggestion: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 228 / 336 / 467 million respectively, and the corresponding PE of the current stock price is 68 / 46 / 33 times. The penetration rate of textile digital printing has a large room for improvement. The company’s equipment and ink are supplied in an integrated way, and the growth is driven by the increment and stock market; Stable business performance and stable leading position, maintaining the “overweight” rating.
Risk warning: textile printing digital substitution is less than expected risk; The epidemic affects the downstream textile industry, the target company’s operation does not meet expectations and the risk of goodwill impairment; The risk that the effect of collaborative integration is not as good as expected.
