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[Dongxing Machinery and military industry] Hunan Electric Power Co., Ltd.: light equipment to regain vitality

source: machinery and military industry e insight

report summary

event: the company plans to pre list and transfer 100% equity of Xiangdian wind energy in the industrial exchange. At the same time, it is planned to issue no more than 209million additional shares at the price of 5.17 yuan/share to Xingxiang group subordinate to Hunan SASAC, and raise no more than 1.081 billion yuan for replenishment

divest loss making subsidiaries, supported by real gold and silver from Hunan state-owned assets. Xiangdian wind energy lost 1.32 billion yuan in 2018 and 300million yuan in September, and there is no hope of turning around under the existing conditions. This disposal is the second action after the transfer of Changsha water pump plant to stop the bleeding point. According to the net assets of 1.384 billion of Xiangdian wind energy, if the transfer is successful, the listed company is expected to obtain a better capital return. In the future, the company will focus on the main industry sectors of motor, electronic control and military industry. In terms of financial support, previously in September 2017, Xingxiang group had subscribed for 940million yuan of payable bonds. At present, the exchange price has been revised down to 6.9 yuan/share, and the stock exchange period will be September 14, 2020. The lock up price is 5.17 yuan/share, and the fixed increase financing is 1.08 billion yuan. The limited sale period is 18 months, which once again reflects the determination of Hunan state-owned assets to become bigger and stronger listed companies. The third quarter report of 2019 shows that the company's long-term loan is 130million yuan, and the financial expenses in the first three quarters are 268million yuan. After the completion of additional issuance and current replenishment, it is expected to significantly reduce the debt level and improve the financial statements by paying off bank loans

electromagnetic ejection and all electric propulsion technology are the core competitiveness of the company, with the world's advanced level. Xiangdian power company, established in 2017, focuses on military products. Under the guidance of the team with Academician Ma Weiming as the core, it has developed rapidly in the field of all electric systems, special motors, high-efficiency energy storage and other cutting-edge equipment technology. In 2018, Xiangdian power achieved a revenue of 1.027 billion yuan and a net profit of 75.63 million yuan. According to the consolidated balance sheet in the third quarter report of the company for 19 years, the advance collection as of the end of September was as high as 960million yuan. We predict that this is mainly the advance payment of military products of Xiangdian power

the announcement of additional issuance disclosed that the company is currently establishing a high-end technology research and development platform to accelerate the layout of high-end products such as civil satellite launch power system, ship integrated power system, high-power permanent magnet motor, ultra-high power density motor, high-power intelligent offshore fan, rail transit traction system, new energy vehicle electric drive system, special vehicle electric drive system, etc. In terms of civil satellite launch power system, the electric propulsion system in the aerospace field is also known as "electric rocket". By constraining electrons in the magnetic field and using accelerating cations to obtain thrust, it has the advantages of simple structure, high specific impulse, high efficiency and so on. The use of electric rockets can achieve spacecraft attitude control, position maintenance, orbit change, interstellar navigation and other tasks

profit forecast: according to the company's announcement, the company is actively stripping loss making businesses, and the intervention of Xingxiang group has created a better environment for the development of listed companies. The company has built a core military products platform, has key national projects, has sufficient cash flow, and is expected to incubate more new projects. We expect that the profitability of high-quality military assets of listed companies will quickly appear after the divestiture of loss making assets. The company has predicted a loss of 1.4 billion yuan in 19 years and is fully liquidated. Considering the urgent demand for military products, the rapid growth of orders of Xiangdian power and the significant decline in financial expenses, we expect the annual net profit of the company to be -1.42 billion yuan, 310million yuan and 490million yuan respectively, and the corresponding EPS to be -1.23 yuan, 0.27 yuan and 0.43 yuan respectively; The corresponding PE is -7.8x, 36x and 22x respectively. In the long run, the market value space is more than 20billion yuan. "Strongly recommended" rating for the first coverage

risk tip:

the progress of asset divestiture and additional issuance is less than expected, and military orders are less than expected

report body

1 Basic information of the company

Xiangdian Co., Ltd. is an excellent asset of the main business of Xiangdian Group Co., Ltd. It was registered in 1999 and publicly listed on the Shanghai Stock Exchange in 2002. With 80 years of motor development experience, the company is in a leading position in the domestic motor industry and has high popularity and market influence in the international motor industry. At the same time, the research and development ability and system integration ability of Xiangdian electromechanical integration major equipment are at the advanced level in the same industry. It has three core technologies: electric traction technology, marine electric propulsion technology and electric vehicle manufacturing technology. It has successively developed more than 1100 major new products (sets) in China, of which more than 100 major equipment have filled the domestic gap, and made outstanding contributions to the localization of major equipment in China

at present, the company has five business segments: wind power generation, AC motor, water pump and supporting products, urban rail transit vehicle traction system, and DC motor. Among them, AC motor and DC motor are mainly military products, which are used in the whole system of power generation, distribution, transformation and drive of all kinds of ships, as well as the transmission and drive system of some special vehicles

in recent years, affected by wind power and trade litigation, the company has suffered serious performance losses. The company's operating revenue has been declining since 2016, and the revenue fell by more than 30% in 2018. The loss in 2018 was 1.909 billion yuan, and the loss in 2019 was 1.4 billion yuan

the company's large losses are mainly due to the serious losses of its subsidiaries Xiangdian wind energy Co., Ltd. and Changsha Water Pump Plant Co., Ltd. In addition, the company's business performance other than military motor business is not satisfactory. According to the company's 2018 annual report, the net profit of Xiangdian wind energy company in 2018 was -1.324 billion yuan, and the net profit of Changsha water pump was -287 million yuan. In addition, the net profit of Xiangdian heavy equipment Co., Ltd. was -109 million yuan, which also had a serious impact on the profitability of listed companies

in 2019, the company's wind power and water pump business continued to drag down the company's performance. The reason for the company's serious losses in wind power is that the price of raw materials and operating costs are too high, the profit space is compressed, the water pump products are subject to the needs of the national power structure adjustment and energy conservation and environmental protection, the nuclear power project slows down, the sales volume of water pumps decreases significantly, and the profit of water pumps also decreases significantly due to the high material prices and operating costs. According to the situation in 2018, the total revenue of the company's wind power and water pump business accounted for more than 1/4 of the company's overall revenue

from the perspective of the company's own operation, it is no longer possible to reverse the loss by relying on normal operation. Therefore, the company has started a drastic structural and strategic adjustment since 2019

2. Rescue: divest loss assets, increase by a fixed amount, and improve the financial situation

the company announced on July 27, 2019 that it plans to transfer all 70.66% of its shares in Changsha water pump plant at the listing base price of 1 yuan. Changsha water pump plant has suffered continuous losses in the past three years, and the amount of losses has increased significantly year by year, seriously affecting the company's operating performance. Transferring the equity of Changsha water pump plant held by the company is conducive to reducing the adverse impact of Changsha water pump plant on the company, further optimizing the company's asset structure, improving the operation efficiency of the company's assets, and realizing the reform and extrication from difficulties as soon as possible. At the same time, it is conducive to Changsha Pump Plant to introduce new systems and mechanisms and stimulate business vitality

on February 19, 2020, the company announced that it plans to transfer 100% of the equity of Xiangdian wind energy Co., Ltd. held by the company. Due to the increasingly fierce competition in the wind turbine business industry of the company, the prices of main raw materials and parts rise, coupled with the further narrowing of profit space and poor profitability, there are certain industrial development risks; Xiangdian wind energy has suffered large losses for a long time, and it is difficult to stop losses in the short term, which has seriously affected the company's operating performance. The transfer of the equity of Xiangdian wind energy held by the company is conducive to reducing the adverse impact of Xiangdian wind energy on the performance of more and more businesses now used in the industry by the company's electronic universal testing machine

at the same time, the company plans to issue no more than 209117575 non-public shares in 2020 (no more than 30% of the total share capital of the listed company before this offering), and the total amount of funds raised will not exceed 1081137863 yuan. Xingxiang group, the issuing object, is the only state-owned capital operation platform in Hunan Province. As of the end of January 2020, the total fund management scale of Xingxiang group has exceeded 22billion yuan, and has established cooperative relations with more than 10 financial institutions, with a total approved financing limit of more than 4billion yuan. By the end of September 2019, the total assets of Xingxiang group were about 45.6 billion yuan, and the net assets were about 39.6 billion yuan

the three announcements are clear, and the actual content is: divest the assets with serious losses, and "transfuse" state-owned assets to get rid of the liquidity crisis

3. Recovery: focus on the main business of electric machinery, electromagnetic ejection and all electric propulsion to help the company achieve Nirvana and rebirth

the company made it clear in the announcement of the transfer of wind power equity that the transfer of the company's equity in Xiangdian wind energy is conducive to reducing the adverse impact of Xiangdian wind energy on the company's business performance, focusing on the main business sectors of electric machinery, electronic control and military industry, further optimizing the company's industrial structure, and improving its core competitiveness and operational efficiency. Xiangdian power company, established in 2017, focuses on military products. Under the guidance of the team with Academician Ma Weiming as the core, it has developed rapidly in the field of all electric systems, special motors, high-efficiency energy storage and other cutting-edge equipment technology. In 2018, Xiangdian power achieved a revenue of 1.027 billion yuan and a net profit of 75.63 million yuan. According to the consolidated balance sheet in the third quarter report of the company for 19 years, the advance collection as of the end of September was as high as 960million yuan. We predict that this is mainly the advance payment of military products of Xiangdian power

the announcement of additional issuance disclosed that the company is currently establishing a high-end technology research and development platform to accelerate the layout of high-end products such as civil satellite launch power system, ship integrated power system, high-power permanent magnet motor, ultra-high power density motor, high-power intelligent offshore fan, rail transit traction system, new energy vehicle electric drive system, special vehicle electric drive system, etc

electromagnetic ejection and all electric propulsion technology are the core competitiveness of the company, with the world's advanced level. Electromagnetic ejection is to use electromagnetic energy to push the ejected object outward. At present, the main use is for the ejection and take-off of carrier aircraft on aircraft carriers. One of the highlights of the latest American aircraft carrier "Ford" is the use of electromagnetic catapults

the main component of the electromagnetic catapult is a set of linear motor, which uses strong current to drive the slider forward at high speed through the magnetic field generated by the coil. The coil through which the current passes wraps the armature and is embedded in the inner side of the ejection track, generating a strong magnetic field; The slider advances at high speed under a strong magnetic field; When the slider operates, only the coil around the slider is energized to generate a strong magnetic field to ensure that the energy consumption of the system is minimized

according to the aircraft carrier manufacturing experience and development trend of the U.S. Navy, the electromagnetic ejection system will become the standard ejection system of aircraft carriers in the future

in terms of civil satellite launch power system, the electric propulsion system in the aerospace field is also known as "electric rocket", which is achieved by constraining electrons in the magnetic field and using accelerating cations. ④ human machine interface technology. Human machine interface technology is mainly for the convenience of instrument operators or main equipment equipped with instruments, and the operator of the main system to operate instruments or main equipment, and the service power of the main system. It has simple structure, high specific impulse High efficiency and other advantages. The use of electric rockets can achieve spacecraft attitude control, position maintenance, orbit change, interstellar navigation and other tasks

at present, LEO communication satellite network is becoming a hot spot in the development of various countries. On January 14th, 2020, the European Consulting Company released the latest satellite manufacturing and launch service analysis report "satellite manufacturing and launch before 2028". The report predicts that the satellite market will undergo fundamental changes in the number, value and quality of satellites, including manufacturing and launching