\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 499 Keda Industrial Group Co.Ltd(600499) )
Events
Recent announcements of the company: 1) it plans to terminate the non-public offering of A-Shares in 2022 and apply for overseas issuance of global Depositary Receipts (GDR) to be listed on the Swiss stock exchange; 2) Performance forecast of 2022 first quarter report: during the reporting period, the net profit attributable to the shareholders of the listed company is expected to be about 900 million yuan, with a year-on-year increase of 371.91%. In this regard, our comments are as follows:
Key investment points
Change fixed value-added tax to GDR, reduce equity dilution, broaden financing channels and improve shareholder structure
On February 11, 2022, the China Securities Regulatory Commission issued the regulations on the supervision of interconnected depositary receipts business of domestic and foreign stock exchanges, which is an important step in the reform of China’s capital market, which is conducive to improving the openness of China’s capital market and establishing the image of Chinese enterprises in the international capital market. At present, Sany Heavy Industry Co.Ltd(600031) / Gotion High-Tech Co.Ltd(002074) / Ningbo Shanshan Co.Ltd(600884) / Lepu Medical Technology (Beijing) Co.Ltd(300003) and other Chinese leading enterprises have planned to issue GDR overseas.
For the company, there are several improvements in changing the fixed increase to overseas issuance of GDR financing: 1) equity dilution will be reduced (the issuance price of GDR will not be lower than 90% of the average price of the 20th day before the pricing benchmark date, while the fixed increase is 80%, and the number of new shares issued under the same financing scale will be reduced); 2) Broaden financing channels: overseas funds can be raised by issuing GDR; 3) Improve the shareholder structure: through direct with the Swiss capital market, it can attract overseas long-term investors and improve the shareholder structure of the company.
Steady implementation of capital assisted internationalization strategy
“Globalization” has always been one of the development strategies that the company continues to practice. In 2021, overseas revenue accounted for 47.12%. There are two main international businesses of the company: 1) building ceramics business: it is mainly concentrated in Kenya, Ghana, Tanzania, Senegal, Zambia and other African countries, and IFC will provide us $165 million long-term loan support in 2020; 2) Building materials machinery business: this business covers more than 60 countries and regions such as India, Bangladesh, Pakistan, Southeast Asia, Africa and Europe, and is in the first market position in Asia and the second market position in the world. The high-end market of this business is basically located in Europe and the United States, and the largest competitor is located in Italy. GDR is listed on the Swiss Exchange, which can improve the company’s popularity in the European market, The raised funds can promote the rapid development of overseas business and help the steady implementation of the company’s internationalization strategy.
The first quarterly report is in line with expectations, and Lanke lithium has great flexibility in inventory performance
The net profit attributable to the listed company is expected to be RMB 2029.1 billion in the quarterly report, which is in line with the expectation of the market. The business of building materials machinery continued to expand the market, and the business of building ceramics in Africa increased steadily. In addition, Lanke lithium, which participated in the shares, contributed a large part of the investment income. Lanke lithium had 3500 tons of lithium carbonate inventory at the end of the 21st century. Due to the impact of winter weather on production and transportation, Lanke lithium is expected to have some inventory at the end of the first quarter of 2022, laying the foundation for future performance.
Profit forecast
Regardless of the impact of the overseas issuance of GDR, it is predicted that the company’s revenue from 2022 to 2024 will be RMB 11.397 billion, RMB 12.591 billion and RMB 13.870 billion respectively, and EPS will be RMB 2.23, 2.36 and 2.38 respectively, corresponding to the current share price PE of 8.1, 7.6 and 7.6 times respectively, maintaining the “recommended” investment rating.
Risk tips
Macroeconomic downside risk, slow progress of overseas projects, lower than expected capacity expansion and sales of Lanke lithium industry, lower than expected demand for lithium battery, lower price of lithium carbonate, higher price of raw materials, further aggravation of covid-19 epidemic, reduction of shareholders’ holdings and failure to successfully complete GDR.
