\u3000\u3000 Xiangtan Electric Manufacturing Co.Ltd(600416) (600416)
Event: on January 24, 2022, the company issued an announcement, mainly involving two aspects:
1) it is proposed to raise no more than 3 billion yuan for the serial development and industrialization of vehicle mounted special launch equipment system, the serial development and industrialization of rail transit efficient traction system and energy-saving equipment, the acquisition of 29.98% equity of Xiangdian power and the supplement of working capital.
2) in order to fully mobilize the enthusiasm of the company’s management team and improve the company’s management level, the company issued medium and long-term reward management measures.
I. fixed increase fund-raising project level:
Project 1: serial development and industrial construction of vehicle mounted special launch equipment system, which is a huge application of Xiangtan Electric Manufacturing Co.Ltd(600416) in the field of electromagnetic energy and is expected to traction the 100 billion market. The vehicle mounted special launch equipment system can effectively rely on the coastal terrain, with flexible deployment and strong mobility. It can also use the surrounding environment for cover and easy camouflage. It can not only improve the combat capability of shore based forces, but also meet the current needs of safeguarding maritime rights and interests. According to the feasibility report of the project, the manufacturing and test cost of the key equipment prototype of the project is 657 million yuan, which can imagine the high added value of the equipment. We believe that the vehicle mounted special launch equipment system is the opening of electromagnetic launch technology only in the field of shore based equipment. This alone is expected to bring a 100 billion market (it is feasible to arrange hundreds of equipment along the coast of China). In the future, it will open up greater market space in electromagnetic ejection, electromagnetic railgun and civil satellite launch power system.
Project 2: serial development and industrialization of rail transit efficient traction system and energy-saving equipment, which is Xiangtan Electric Manufacturing Co.Ltd(600416) in-depth layout in the field of civil products. With the construction of urban rail transit in China, it will usher in a golden development period. The implementation of the project can speed up the industrialization rhythm of the company in rail transit medium speed magnetic levitation traction system, rail transit high-efficiency permanent magnet traction system and rail transit energy-saving energy storage system, form a rail transit industrial production mode with high starting point and complete supporting facilities, so that the company can adapt to the rapid changes and personalized needs of the market and form the core competitiveness of “mechatronics”, Meet the needs of scientific and sustainable development, refinement, strength and expansion of the company.
Project 3: acquire the remaining 29.98% equity of Xiangdian power, and wholly control 100% of Xiangdian power after the transaction is completed. Xiangdian power is the main military product subsidiary of the listed company. Its main business includes military products and civil products. Military products business mainly covers special launch, ship integrated electric propulsion system, etc; Civil products business mainly covers ship power, electric motor control, wind turbine, etc. In 2020, Xiangdian power achieved a revenue of 1.616 billion yuan and a net profit of 119 million yuan; From January to September 2021, the company achieved a revenue of 1.256 billion yuan and a net profit of 107 million yuan. The asset evaluation of Xiangdian power is 2.964 billion yuan, which is 24.90x relative to the net profit PE in 2020, which is beneficial to the existing shareholders relative to its position as the core asset of military industry. After asset injection, it will help to further improve the net profit level of listed companies, strengthen the integration of internal resources and improve the overall quality of assets of listed companies. The general manager of Xiangdian power and the chairman of Tongda electromagnetic energy have become the general manager of listed companies, which may indicate that the company is more focused on military industry. Xiangdian focused military industry is ready to meet the surging industrial trends of all electric ships and electromagnetic launch systems.
Item 4: replenishing working capital can greatly reduce the financial burden of the company. By the end of the third quarter report of 2021, the company’s asset liability ratio was 63.87%, and the short-term loan was 2.987 billion yuan, facing great short-term debt repayment pressure. This replenishment of 898 million yuan can significantly reduce the company’s financial expenses, improve the net profit level and further revitalize the enterprise’s operation.
II. Mechanism level:
The medium and long-term incentive management measures (for Trial Implementation) were issued, the management mechanism was further rationalized, and the performance could be released continuously. We see that the performance of state-owned enterprises such as China Zhenhua (Group) Science & Technology Co.Ltd(000733) , Avic Heavy Machinery Co.Ltd(600765) continues to exceed expectations after equity incentive and improvement of management mechanism, Xiangtan Electric Manufacturing Co.Ltd(600416) is expected to embark on the process of double inflection point of fundamentals and mechanism improvement. The company has established a sound incentive and restraint mechanism and issued medium and long-term incentive management measures, including:
The reward objects cover a wide range: Directors (excluding independent directors), supervisors and senior managers of the company, middle-level and above leaders of all departments (departments, offices and centers) and units (branches, business divisions, wholly-owned subsidiaries and absolute holding subsidiaries).
The reward target is based on the best performance in history: the net profit achieved in the highest year in history (217 million yuan) is used as the reference base for the first implementation of the reward. When the actual annual profit exceeds the base, the medium and long-term reward can be implemented.
Reward proportion: the company determines the growth proportion of the net profit target of the current year according to the specific situation of the market and industry every year, and then determines the reward proportion of excess profit on this basis.
Reward cashing: the company’s medium and long-term rewards will be cashed in cash at one time before the end of June of the next year, and the reward object will purchase shares through the secondary market. The exercise period is 3 years, the lock period is 1 year and the unlock period is 2 years. The unlock ratio is 50% and 50% respectively. Xiangtan Electric Manufacturing Co.Ltd(600416) focusing on the construction of subversive weapons and equipment, two core technologies – ship integrated power system and electromagnetic emission are in the stage of application expansion from point to area.
1. Core competitiveness: five national special awards for scientific and technological progress, extremely rare, leading in the world and exclusive to China. Xiangtan Electric Manufacturing Co.Ltd(600416) is a leading manufacturer of “motor + electric control” in China. There is no doubt that the two core technologies of high-power ship integrated power and electromagnetic emission are scarce in China. The company has won five national special awards for scientific and technological progress, which is a good proof of its core competitiveness. At present, the company takes “motor + electronic control” as the technical core. In the trend of iterative upgrading of weapons and equipment electrification, the application penetration of motor and electronic control technology will continue to increase and the application scenario will continue to expand. At present, the company has also formed a high-end business development pattern covering military industry, electric power, rail transportation, new energy vehicles, intelligent complete systems and so on, Committed to building a first-class electric drive enterprise and electromechanical integration system solution provider.
2. Equipment application: the huge market of ship integrated power system and electromagnetic launch technology application traction will enter the introduction period in 2022. We should pay more attention to its long-term growth, and pay more attention to orders rather than performance in that year.
1) all electric propulsion of ships: the development of ship integrated power system (IPS) is an inevitable trend of ship power. In the field of ship IPS, Xiangtan Electric Manufacturing Co.Ltd(600416) propulsion motor is second to none in China. Its growth logic is: on the one hand, it is an inevitable development trend to see the expansion of IPS application in underwater surface ships; On the other hand, due to the increased load on the ship, the power of the propulsion motor will increase, and its value will also increase. Therefore, Xiangtan Electric Manufacturing Co.Ltd(600416) is expected to usher in the Growth Logic of both volume and price with the expansion of the application of IPS.
2) electromagnetic launch technology: a new concept of launch mode, which has great potential advantages and broad application prospects in both military and civil fields. According to the report on electromagnetic launch technology released by academician Ma Weiming, electromagnetic launch technology has great potential advantages and broad application prospects in both military and civil fields, such as electromagnetic ejection device of aircraft carrier, electromagnetic orbital gun technology and electromagnetic ejection technology applied to civil satellite launch power system.
Investment strategy: the investment value of Xiangtan Electric Manufacturing Co.Ltd(600416) is reflected in the performance increment brought by the landing of its electromagnetic emission technology and ship integrated power system technology. Its core technology will expand from point to area in the field of equipment and usher in huge growth space. From a long-term perspective, unloading Xiangtan Electric Manufacturing Co.Ltd(600416) is in line with the general trend of the development of military industry, It is a long-term strategic variety in the field of military industry. The trial implementation of the medium and long-term reward management measures for the new employment of senior executives shows that the corporate governance structure is expected to be improved. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 131 million, RMB 349 million and RMB 496 million respectively, and the corresponding PE will be 160x, 60x and 42x, maintaining the “buy” rating.
Risk tip: the application of new military technology is not as expected.
