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Jinyuan Cement:Private Placement Funding Environmental Protection Business

发布时间:2016-07-12    研究机构:兴业证券

Company Profile

Jinyuan Cement Co Ltd operates within the Cement, hydraulic sector.Event

Jinyuan Cement Co., Ltd released its private placement plan, stating that it was going to privatelyoffer no more than 157million shares at CNY 8.65per share to raise no more than CNY 1.36billion for purchasing 58% stakes in Jiangxi Xin Jin Ye Co., Ltd and investing in 3environmentalprotection projects (Jiangsu Jinyuan, Guannan Jinyuan and Hongyang Environmental Protection).Major shareholders promised to subscribe 20% of all newly‐issued shares (3‐year lock‐up period).The rest will become tradable one year later. And price of Xin Jin Ye will be paid by cash.

Comments

Jinyuan Cement, controlled by Zhao Bisheng and Zhao Hui (father and son), went public throughback door listing in 2014. It made CNY 1.865billion in revenue in 2015, up 35.7% YoY. The netprofit attributable to shareholders stood at CNY 264million (CNY 192million after deducting nonrecurringprofits and losses), increasing by 103.9% compared to a year earlier.

Jinyuan Cement cut part of its real estate business and two cement production lines in Shanxiwhile purchased 5companies in Qinghai producing ready‐mixed concrete. The Company isgradually mobilizing its cement production capacity to Qinghai and has grown into the largestcement producer in the province (4.1million metric ton annually). Infrastructure construction inTibet (on the south of Qinghai) boosted demand for concrete, which helps sustain the price athigh level. Spread of cement price is nearly CNY 500/ton (including tax) between Xining and Lhasawhile freight rate from Xining to Lhasa is only CNY 350/ton. So cement in Qinghai can be directlytransported to Tibet. As Jinyuan’s factory is in the middle section of Qinghai‐Tibet Highway,transportation expense can be further saved (CNY 90lower than normal). Net profit of thisproduction line is expected to reach CNY 120/ton.

Xin Jin Ye is the largest hazardous waste treatment company in Jiangxi with approved disposalcapacity of 177.5thousand metric tons. Its main business is the harmless disposal of metalhazardous waste and the reclamation of recycled metal. Xin Jin Ye promises that the net income(lower of net profit attributable to shareholders or net profit after deducting non‐recurring profitsand losses) will be no less than CNY 320million. It made CNY 102million net profit attributableto parent company (the net income after deducting non‐recurring profits and losses reachedCNY 17.9million), which is principally contributed by recycled metal.

Earnings forecast and Investment Recommendations: We made EPS forecast for the Company atCNY 0.56in 2016, CNY 0.63in 2017and CNY 0.63in 2018, implying 15x/13x/13x PE. Consideringcurrent low PE level and great potential to boom in environmental protection field, we giveOUTPERFORM rating for the Company.

Potential risks: Plummet in price of cement in Tibet, M&A generated worse‐than‐expected results.

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