China's Haiphong: Asset injection is steadily advancing

Today, the strength of the navy has become a symbol of national military strength. Whether it is controlling the security of maritime strategic lines of communication, or maintaining and expanding overseas interests, a powerful navy is inseparable. Therefore, the functions of my country's navy are gradually shifting to 'offshore defense + far-sea escort', and the navy's requirements for advanced weaponry and equipment electronic information are also gradually increasing.

Affected by factors such as poor equipment working environment, complex types, and serious electromagnetic environment interference, the ship's electronic information industry has extremely high technical barriers. At present, the domestic military ship electronic equipment research and development units are mainly based on the military industry group scientific research institutes, and the ship electronic information related scientific research institutes are mainly concentrated in the China Shipbuilding Industry Corporation. China Shipbuilding Industry Corporation is the backbone of my country's shipbuilding industry, shouldering the sacred mission of modernizing naval equipment and the historical mission of developing the marine economy and building a maritime power.

China Coast Defence (600764) is the only electronic information listing platform under China Shipbuilding Industry Corporation, focusing on the research and development and production of underwater acoustic information transmission equipment and underwater weapon system special equipment. It is also the core supplier of this military equipment for the Navy. , Testing, experiment and other aspects have deep technical reserves. It is understood that China Haiphong injected Great Wall Electronics through asset reorganization in 2017, and its main business has been transformed into underwater acoustic information transmission. At present, the company is implementing further reorganization and plans to further expand its business to the fields of underwater acoustic detection, acquisition of underwater acoustic information, and underwater confrontation, so as to achieve full coverage of underwater acoustics

According to the latest announcement, the company intends to acquire the equity of Haisheng Technology, Liaohai Equipment, and Jereh Electronics for 6.75 billion yuan, and inject the high-quality underwater acoustic assets of the 715, 716 and 726 research institutes of CSSC. It is worth noting that in this reorganization, Jereh Electronics is the largest target to be injected into the listed company, and its performance commitments for 2019-2021 are 2.40, 2.89, and 328 million yuan. According to public information, Jereh Electronics is in a leading position in the professional fields of high-performance shaft angle conversion, high power density power supply, adaptive traffic signal control and other professional fields. It has advanced integrated circuits, microcircuit modules, intelligent transportation equipment and system design and development. Ability, it is expected to realize import substitution in many fields such as encoder and module power supply.

Changjiang Securities (7.410, 0.11, 1.51%) pointed out that after the completion of the asset injection, China Coast Defence will become the leader of my country's naval underwater acoustic system. While the market position is greatly improved, profitability will also increase significantly. According to analyst consensus, considering asset injection, the pro forma net profit of China Haiphong from 2019 to 2021 is expected to be 6.47, 7.71, and 870 million yuan, respectively. The diluted earnings per share will reach 0.91, 1.09, and 1.23 yuan. The price-earnings ratio corresponding to 2019 performance is about 36 times, which is significantly lower than the average valuation of 64 times for the defense industry.

Another industry insider believes that the asset injection will further clarify the strategic position of China Haiphong as the only integrated platform for the electronic information industry of China Shipbuilding Industry Corporation, and it is expected to completely open up the business and capital channels of the research institute and listed companies. Previously, the company had announced that the controlling shareholder China Shipbuilding Industry Corporation was planning a strategic reorganization with China State Shipbuilding Corporation (24.810, 0.30, 1.22%), and that the annual profits of the two groups' external information assets could reach billions of yuan. In addition, the group also has 5 surface electronics and combat system related assets, including 707 and 709, and there are still strong expectations for injection in the future.