\u3000\u3 Guocheng Mining Co.Ltd(000688) 789 Hangzhou Honghua Digital Technology Stock Company Ltd(688789) )
It plans to acquire 67% equity of Jingli digital; Jingli’s revenue and net profit increased by 154% and 152% in 2021
The company announced that it plans to acquire 67% equity of Jingli digital with 67 million yuan in cash; The book value of shareholders’ equity of Jingli digital is 17.17 million yuan, the appraisal value is 106.73 million yuan, and the appreciation rate is 521%, corresponding to 7.4 times of the valuation in 2021. Jingli digital is one of the outsourcing factories of Hangzhou Honghua Digital Technology Stock Company Ltd(688789) ink, which is mainly engaged in inkjet printing. In 2020, the revenue was 28.3 million yuan, 87% of which came from Hangzhou Honghua Digital Technology Stock Company Ltd(688789) , making it the fifth largest outsourcing supplier of Honghua ink in 2020. In 2021, the revenue was 71.96 million yuan and the net profit was 14.52 million yuan, an increase of 154% and 152% respectively.
The acquisition of Jingli digital can reduce the ink cost and enhance the company’s core competitiveness with the advantages of scale and procurement
According to our survey data, the price of dispersed ink is only 5-8% higher than that of traditional ink, while the price of active ink is still 2-3 times that of traditional ink. After the completion of the transaction, additional capacity was added on the basis of the 5000 tons of ink capacity raised and invested in the IPO, and Jingli is located in Tianjin, an important place of fine chemical industry, where ink raw materials can be obtained nearby. The scale effect and procurement cost advantages help to reduce the ink cost rapidly and accelerate the improvement of the penetration rate of digital printing.
Xiyin plans to invest 15 billion yuan to build the bay area supply chain headquarters, and its demonstration effect will help improve the penetration rate
Xiyin, a fast fashion cross-border e-commerce giant, plans to invest 15 billion yuan to build the “Xiyin Bay supply chain headquarters” in Guangzhou, which is expected to accelerate the penetration of China’s digital printing. With the explosion of fast reverse demand, the rapid decline of digital jet printing costs, technological progress and policy boost, the global digital printed cloth penetration rate will increase from 10% to more than 26% in 2020, and the CAGR is 29%. The company’s digital jet printing equipment and ink will fully benefit. The exercise condition of equity incentive in August 2021 is that the net profit CAGR in the next three years shall not be less than 30%.
“Equipment + ink” mode is excellent, and the proportion of ink revenue will exceed that of equipment, forming the basis of long-term growth
In 2020, the company’s equipment revenue was 450 million and ink revenue was about 200 million. The proportion of ink revenue of the company is expected to rise from 28% in 2020 to 40% in 2025. According to our calculation, the proportion of ink revenue of the company in 2021 is expected to increase by nearly 10 PCT. In the long run, with the increasing stock of equipment, the proportion of ink revenue with consumables will exceed that of equipment, which will form the basis for the long-term and stable growth of the company.
Digital jet printing technology has strong universality, and its application can be extended to book printing, printing and dyeing, packaging and building materials
The core of digital jet printing technology lies in pattern data processing, precise jet motion control and the adaptability between nozzle and ink. It has certain universality in the field of pattern printing. With the progress of technology, its application field will no longer be limited to the production of printed cloth, and is expected to be further extended to different fields such as monochrome printing and dyeing, book printing, packaging printing and building materials. The company has mastered the core technology of digital jet printing, and there is room for further improvement in its future development.
Profit forecast and valuation
Considering that the transaction is not completed, the profit forecast will not be adjusted temporarily. It is estimated that the net profit from 2021 to 2023 will be 230 / 34 / 470 million yuan, with a year-on-year increase of 33% / 50% / 38% and PE of 68 / 45 / 33 times. Maintain the “buy” rating. Risk tips: 1) risk of relying on outsourcing of core components; 2) Bad debts caused by rapid growth of receivables
