Valin Steel (000932)： Proposed cash acquisition of Yangchun New Steel significantly improves profitability and long-term competitiveness

Valin Steel (000932): Proposed cash acquisition of Yangchun New Steel significantly improves profitability and long-term competitiveness

The company intends to acquire Yangchun Xingang in cash, and the acquisition of PB is 1.

03 times, PE is 3.

13 times.

Valin Steel announced that Valin Xianggang, the company’s controlling subsidiary, intends to pay cash16.

550,000 yuan, the acquisition of 51% equity of Yangchun New Steel held by Xianggang Group, the acquisition of PB (2019H1) is 1.

03 times, the acquisition of PE (2018) is 3.

13 times.

Xianggang Group is a wholly-owned subsidiary of Valin Group. The Democratic Party holds 86% of Yangchun New Steel.

Through this transaction, the company will consolidate the scope of Yangchun New Steel’s consolidated consolidated statements, which will effectively reduce the company’s intra-group competition and related transactions within the group.

Yangchun New Steel has a crude steel production capacity of 300 units, which will optimize the company’s coastal layout.

Yangchun New Steel is located in Yangchun City, Guangdong Province. It has a coastal advantage, and its comprehensive transportation cost is 150 yuan / ton lower than that of inland steel mills. Its main products are 武汉桑拿 construction long products, with an annual production capacity of 300 tons of crude steel, which is close to the end of the South China steel demand market.

After the acquisition, the company’s steel output will increase by 15%, which enriches the long product structure, expands the production base to the coastal areas of Guangdong, and enhances competitiveness.

Yangchun New Steel’s performance has grown steadily, with high levels of governance and production efficiency.

Yangchun New Steel’s 2016-2018 performance has steadily increased, with operating income from 65.

3.5 billion to 118.

56 ppm, net profit from 0.

8.6 billion to 10.

24 ppm, with a composite strength of 34.

69% and 244.

48%; corporate governance proposes the characteristics of “conventional system, private mechanism”, with higher production efficiency and an annual output of more than 1,100 tons of steel per capita; injected into listed companies committed to exerting synergies in production, operation, management, and manpower to further improve profitabilityability.
Committed to significantly improve profitability and competition, and maintain the “overweight” rating.

We do not consider the impact of this transaction for the time being, and maintain the company’s expected EPS for 2019-2021 to be 0.

95 yuan, 0.

79 yuan, 0.

66 yuan.

The company intends to acquire Yangchun New Steel to realize the coastal industrial layout. It is expected to significantly improve profitability and long-term competitiveness. It is estimated that the level is low, and the expected return on investment is expected to increase. We maintain the company’s “overweight” rating.

Risk warning: the company’s acquisition of Yangchun New Steel is less than expected; the risk of steel price fluctuations; the company’s production safety risks, etc.