\u3000\u3 China Vanke Co.Ltd(000002) 088 Luyang Energy-Saving Materials Co.Ltd(002088) )
Event: on April 27, 2022, the controlling shareholder of the company, qinai Asia Pacific, launched a partial tender offer for the company, with an offer price of 21.73 yuan / share and a number of 126 million shares. Qinai Asia Pacific signed a memorandum of strategic cooperation with the collective assets operation and management center of Nanma street, Yiyuan County (hereinafter referred to as “Nanma”) and agreed on the strategic cooperation between the two sides after the successful acquisition. Note 1: the term of this tender offer is 30 natural days (the starting date has not been determined). If the number of shares to be offered in advance is less than 116 million shares, this tender offer will not take effect from the beginning. Note 2: qinai is the global leader in ceramic fiber materials.
Comments:
Qinai Asia Pacific is expected to hold more than 50% of the shares: as of April 17, 2022, qinai Asia Pacific holds 142 million shares of the company, accounting for about 28.14% of the total share capital. If the acquisition is completed, the maximum shareholding of qinai Asia Pacific will reach 268 million shares, and the shareholding ratio will rise to 53%. The purpose of the acquisition by the controlling shareholder is to further consolidate the control of the company and enhance the stability of the ownership structure. If the tender offer is successfully completed, the controlling shareholders will further support and promote the growth and business development of the company with their own business experience and resource advantages.
If the tender offer is successful, qinai Asia Pacific promises to increase the investment in the company’s resources: according to the strategic cooperation memorandum signed between qinai Asia Pacific and Nanma, if the acquisition is successfully completed, qinai Asia Pacific promises as follows: 1) it will not move the company away from Yiyuan, and the shareholding proportion of qinai will increase to more than 50%, which will give it the source power to continue to invest in the company (including high-tech investment); 2) The five-year development plan of qinai – Luyang Energy-Saving Materials Co.Ltd(002088) has been formulated. It is expected to increase the investment in fixed assets for the company to optimize the industrial structure, tap the production potential and steadily increase sales, mainly focusing on exhaust control, special fiber and industrial heat management. 3) Build the company into a special material production, R & D and innovation center and major industrial platform of qinai in China, gradually integrate its business in China into the platform, and all future investments will be operated on the platform; 4) It will bring new technology to support the upgrading of PCW alumina products at the current stage of the company; 5) Maintain the stability of Luyang Energy-Saving Materials Co.Ltd(002088) current core management team and build the company into an innovative enterprise combining local wisdom and international vision.
There is an obvious premium on the tender offer price, and the company may usher in continuous empowerment: as of April 26, 2022, the company’s share price is 13.10 yuan, and the price premium of this tender offer is obvious. Previously, qinai Asia Pacific, as the controlling shareholder of the company, had resources and technology empowerment, but its strength was relatively limited. According to the commitment, if qinai holds more than 50% of the shares, it will inject more assets and technologies, and build the company into its industrial and investment operation platform in China. In addition, qinai emphasizes the stability of the core management team, and the current management style is expected to continue to achieve a win-win situation.
Profit forecast and valuation rating: the energy-saving transformation of high-energy consumption industry is the general trend, and the company’s technology and cost advantages are leading in the industry. Therefore, the logic of “market share improvement brought by the reform of supply side marketing system + energy conservation and carbon reduction trend to promote the expansion of market demand” will still be deduced. If the tender offer of the controlling shareholder is successful, the company’s business structure is expected to usher in a qualitative improvement, and the growth ceiling will continue to open. We maintain the company’s EPS forecast of 1.23, 1.56 and 1.90 yuan for 22-24 years, respectively, and maintain the “buy” rating.
Risk tip: the growth of industry demand is less than expected; The increase of the company’s market share is less than expected; New business expansion is less than expected; The recovery of rock wool business was less than expected; The proportion of cash dividends decreased significantly; This tender offer will not take effect.
