\u3000\u3 Guocheng Mining Co.Ltd(000688) 789 Hangzhou Honghua Digital Technology Stock Company Ltd(688789) )
Event:
The company announced that it plans to acquire 67% equity of Jingli digital with its own funds or self raised funds of 67 million yuan. After the completion of this transaction, the company holds 67% equity of Jingli digital, which will become the holding subsidiary of the company.
Meaning:
1. The main business of Tianjin Jingli digital is the development, production and sales of ink, ink (except ink ingot) and related additives. In 2021, the target company achieved a revenue of 719615 million yuan, a net profit of 145215 million yuan and a net interest rate of 20.18%.
2. The book value of shareholders’ equity of Jingli digital is 171742 million yuan, and the assessed value of all shareholders’ equity is 1067263 million yuan. The assessed value-added is 895521 million yuan, with a value-added rate of 521.43%. The reasons for value-added are as follows: 1) Jingli digital’s main market segment is the textile printing market, and its technical level is high. It has 7 patented technologies, 17 trademark rights, 11 computer software copyrights and 1 work copyright, and has established a close cooperative relationship with the Binhai Industrial Technology Research Institute of Zhejiang University. 2) 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.
3. This acquisition is to further realize the company’s strategic development objectives, enrich the layout of the company’s upstream and downstream industrial chain, improve the company’s self production rate of ink, further reduce the ink production cost and enhance the company’s core competitiveness.
Optimization thinking: “technology + brand + cost” stacking wall
The market share of Honghua digital printing equipment ranks first in China and third in the world. In the future, the company is expected to seize more market share by virtue of technical iteration (from 0 to 1 → from 1 to ∞) + brand advantage (Channel & marketing → brand premium) + cost advantage (partial standard → scale effect → improvement of bargaining power → cost advantage → high cost performance).
Profit forecast
We estimate that the net profit attributable to the parent company in 22-23 years is 3.1/430 billion respectively, and the corresponding PE is 49 / 36x respectively.
Risk warning: the implementation of acquisition is not as expected; This transaction may face valuation risk, goodwill impairment risk and the risk that it is difficult to achieve efficient integration; The product price is greatly affected by the price fluctuation of raw materials; The gross profit margin is low as a whole; The main products are subject to changes in industrial policies in downstream application fields.
