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Tongwei Co. (601588 CH):Acquisition of New Energy Assets; Ambition to Develop Green Agriculture Integrating Fishery with PV

发布时间:2015-05-13    研究机构:光大证券(香港)

Event:

1. Tongwei Co. said in an announcement that it plans to issue232m shares to original shareholders of Tongwei New Energyand Yongxiang Co. at Rmb8.84 per share in order to acquire100% interest of Tongwei New Energy from Tongwei Group, aswell as 99.9999% stake of Yongxiang Co. from 17 corporations,including Tongwei Group, Giastar Group, etc, and 29 naturalpersons, including Tang Guangyu, etc. After the transaction, thestake of Tongwei Group will fall from 57.35% to 43.72%, and LiuHanyuan, chairman of Tongwei Group, will continue to be theactual controller of Tongwei Co.

2. Tongwei Co. plans to issue 219m shares to 10 specific investorsthrough a private placement, and the majority of net proceeds ofapproximately Rmb2bn from the placement will be used topromote the development of various PV power generationschemes under Tongwei New Energy, such as the fishery + PVintegration project, the agriculture + PV complementationproject, and the roof-top power station project in rural areas, etc.

The remaining proceeds will be used for cash flowreplenishment, capital operation maintenance, etc.

Targeting leading players in the PV industryFounded at the end of last year, Tongwei New Energy is a subsidiaryspecialized at development of agricultural PV power stations with astrong PV power generation technological team. Yongxiang ownstwo segments, namely the new energy segment and the chlor alkalichemical segment, with annual polysilicon production capacity of15,000 tonnes. It takes a leading position in the industry measuredby comprehensive energy consumption of polysilicon unit product,thanks to the circular economy business model covering causticsoda, PVC, polysilicon and cement.

Green business model integrating PV and agricultureTongwei Co. is a leader in the aquaculture feed market withabundant agricultural and land resources, such as fish ponds. Thecompany targets to explore new commercial cultivation models onthe basis of “smart fishery” and “fishery + PV integration”, in a bid toboost profitability through multilevel cultivation. To be specific,Tongwei New Energy will construct PV power stations on thecompany’s farmland assets to develop green energy-basedagriculture portfolio integrating PV power stations and fish farmingbusinesses. Meanwhile, the new power stations can help absorbpolysilicon production capacity of Yongxiang, boding well forone-stop operations throughout the industrial chain. Integration ofquality resources across different fields will enable the company toown obvious competitive edges.

Earnings forecasts and valuation: We expect net profit attributable toparent of the company’s original agricultural business to be Rmb500m,Rmb630m and Rmb770m respectively over 2015-17, and promised netprofit of target PV assets is Rmb90m, Rmb220m and Rmb320mrespectively for the three years. We give the PV business and agriculturebusiness 2016E PE of 35x and 25x respectively, corresponding to areasonable market cap of Rmb23.5bn. Taking into account of the dilutioneffect of 1.268bn shares of capital stocks after the private placement, wegive Tongwei Co. a Buy rating with a TP of Rmb18.49.

Risk factors: The private placement might not be approved.

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