[Today’s Guide]
> Three ministries support new energy buses, sales expected to multiply
> Central government to support agricultural e-business, SOA to sea water desalination
> Lanfeng Bio-chemical to acquire Ark Medicine, Jincheng Phar. to acquire Laneva Phar. through private placement
> Sanxia New Building Materials to acquire mobile terminal retailer, Hybio Phar. to invest in chronic disease management
[XFA Focus]
○ Three departments support new energy buses, sales expected to multiply
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The Ministry of Finance, the Ministry of Industry and Information Technology (MIIT) and the Ministry of Transport jointly released a document on May 14, requiring improving the subsidizing policies on the refined oil products prices for urban buses and accelerating the promotion of new energy buses. Each bus will receive an annual operation subsidy of a maximum of 80,000 yuan and a minimum of 20,000 yuan in the following five years. The document also requires introducing the performance evaluation. Based on the evaluation target, 40 percent of buses to be added and replaced in 10 key provinces and municipalities in air pollution treatment shall be new energy vehicles.
Comment: As the operation lines and time of buses are relatively fixed, they enjoy superior advantages in the promotion of new energy. The Ministry of Transport proposed that the number of new energy buses will reach 200,000 in 2020, but the actual sales of new energy buses in 2014 is less than 20,000. Institutes estimate that the sales of new energy buses of Zhengzhou Yutong Bus Co., Ltd. (600066.SH), Zhongtong Bus Holding Co., Ltd. (000957.SZ) and other leading enterprises are expected to double this year. As for Songz Automobile Air Conditioning Co., Ltd. (002454.SZ) and other accessories providers, the orders from new energy vehicles enjoy higher gross profit than traditional passenger cars. The lithium battery market will also benefit from the process.
[XFA Selection]
○ With the implementation of various policies on maintaining economic growth, the national general public budgetary expenditure increased 33 percent year on year in April, the highest growth in three years.
○ China’s electricity consumption rose 1.3 percent year on year in April. The service industry’s power use hiked significantly.
○ Liu Qibao, minister of the Publicity Department of the CPC Central Committee, participated at the symposium on the development of cultural industry, indicating that it will promote the cultural industry to be a pillar industry in the national economy.
○ Experts at the National Development and Reform Commission (NDRC) indicated that with the acceleration in the implementation of energy channels in the One Belt and One Road initiatives, the oil and gas pipeline construction is likely to see more investments this year.
○ The China Securities Finance Corporation Limited released a document to cancel the restrictions on the term and fees of trans-securities lending, which will solve the lack of securities lending sources in the margin trading market.
○ The H shares issued by Huatai Securities Co., Ltd. (001688.SZ) is highly favored. It may raise the financing amount to 4 billion to 5 billion U.S. dollars.
[Industry Information]
○ Central government to support agricultural e-business, leading enterprises to see more growth opportunities
------
Wu Xiangyun, head of the Department of Economic Construction of the Ministry of Finance, indicated at the national meeting on the e-business in rural areas on May 14 that the central finance will arrange 2 billion yuan special capital in supporting the development of e-business in rural areas. More regions in central and western China and more rural residents, rural residents in old revolutionary bases in particular, will benefit more from e-business.
Comment: Agricultural enterprises will accelerate in the e-business and the central government has been introducing supporting policies. The State Council required actively developing e-business in rural areas recently. The Ministry of Finance arranged 2 billion yuan special capital in supporting the development of e-business in rural areas. Institutes estimate that the agricultural commodities market has a capacity of nearly 1 trillion yuan. The access to the Internet by agricultural enterprises will improve the supply chain, reduce the circulation cost and bring new growth opportunities. In terms of listed companies, Beijing Dabeinong Technology Group Co., Ltd. (002385.SZ) plans to invest 1 billion yuan in the establishment of the agricultural Internet. Jiangsu Huifeng Agrochemical Co., Ltd. (002496.SZ) and the China Association of Pesticide Development and Application jointly established the www.16899.com, an e-business website for pesticide. It accounts for 50 percent equities of the website.
○ SOA to promote maritime enterprises going global, sea water desalination to see rapid development
------
The State Oceanic Administration (SOA) released the ‘Key Tasks in the National Maritime Economic Work in 2015’ recently, proposing that the maritime economic development work shall be fully integrated with the strategic tasks in the 21st Century Maritime Silk Road. It will focus on sea water desalination and maritime biological pharmaceuticals and establish an investment cooperation platform for enterprises to promote the going global of maritime enterprises.
Comment: The sea water desalination will be a key source of fresh water resources in the future and enjoys huge potential. According to relevant plans, the sea water desalination capacity will reach a daily 2.2 million cubic meters by the end of 2015. Among A-share companies, Jiangsu Asia-Pacific Light Alloy Technology Co., Ltd. (002540.SZ) has obtained the invention patent for the “sea water corrosion resistant tubes” and the product has been supplied to large sea water desalination projects. Tianjin Motimo Membrane Technology Co., Ltd. (300334.SZ) is a leader in terms of the water treatment membrane capacity in China and provides reverse osmosis membrane for sea water desalination.
[Announcement Interpretation]
○ Lanfeng Bio-chemical to acquire Ark Medicine
------
Jiangsu Lanfeng Bio-chemical Co., Ltd. (002513.SZ) plans to acquire 100 percent equities of Shaanxi Ark Medicine Co., Ltd. with 1.18 billion yuan, among which, 354 million yuan will be paid in cash and the rest will be paid by issuing 77.34 million shares at 10.68 yuan per share. Meanwhile, it plans to raise a supporting fund of 530 million yuan by issuing 49.63 million shares at the same offering price through private placement. The counterparty promises that the net profit of Ark Medicine from 2015 to 2017 will be no less than 74.72 million yuan, 90.36 million yuan and 110 million yuan, respectively. Ark Medicine enjoys advantage in the manufacturing of anti-senile dementia and antineoplastic medicines. Upon completion, Lanfeng Bio-chemical will expand from chemical raw material and chemical product industry to pharmaceutical manufacturing industry and achieve diversified operation strategy.
○ Jincheng Phar. to acquire Laneva Phar. with RMB2 bln
------
Shandong Jincheng Pharmaceutical and Chemical Co., Ltd. (300233.SZ) plans to acquire 100 percent equities of Beijing Laneva Pharmaceutical and Chemical Co., Ltd. with 2 billion yuan by issuing 64.25 million shares at 31.13 yuan per share through private placement. Meanwhile, the company plans to raise a supporting fund of 300 million yuan from Zibo Jincheng Industry Co., Ltd., its controlling shareholder, by issuing shares at no less than 36.24 yuan per share. The counterparty promises that the net profit of Laneva Phar. from 2015 to 2017 will be no less than 156 million yuan, 187 million yuan and 225 million yuan, respectively.
Laneva Phar. is principally engaged in the production and sales of chemical synthesis medicines, covering gynecology, immune-regulation, anti-anaphylaxis and angiocarpy medicines, etc. Upon completion, the company will see leapfrog development in gynecology, immune-regulation medicines, etc.
○ Sanxia New Building Materials to acquire mobile terminal retailer with RMB3 bln
------
Hubei Sanxia New Building Materials Co., Ltd. (600293.SH) plans to raise 3.04 billion yuan by issuing 510 million shares at 5.96 yuan per share through private placement, among which, 2.17 billion yuan will be used to acquire 100 percent equities of Holpe Commercial Chain Co., Ltd. and the rest will be used to supplement working capital. The counterparty promises that the after-tax net profit of Holpe from 2015 to 2018 will be no less than 154 million yuan, 243 million yuan, 297 million yuan and 331 million yuan, respectively.
Holpe, engaged in the sales of mobile terminal products, digital consumption products and accessories, owns self-owned e-commerce platform, online stores, chain direct-sale stores, etc. The company’s sales volume on mobile phones in 2014 reached 3.1 billion yuan and its online/offline users and members total around 10 million.
○ Hybio Phar. to raise RMB1.9 bln to invest in Internet plus chronic disease management
------
Hybio Pharmaceutical Co., Ltd. (300199.SZ) plans to raise 1.91 billion yuan by issuing shares at 23.32 yuan per share through private placement as scheduled, among which, 710 million yuan will be invested in the “Internet plus chronic disease management platform” and the construction of marketing network which mainly improves the living quality of chronic disease patients by integrating medicine, instrument and mobile Internet, 200 million yuan will be invested in the development of new products and the construction of Research & Development center, and the rest 1 billion yuan will be used to supplement working capital. The actual controller and middle and senior management of the company will participate in the subscription. Investment enterprises under Sinopharm Group and China Minsheng Investment Corp., Ltd. will also be involved in the investment.
○ Jiajia Food to control Yunchu E-commerce
------
Jiajia Food Group Co., Ltd. (002650.SZ) plans to increase capital in Changsha Yunchu E-commerce Co., Ltd. by 50.00 million yuan. Upon completion, the company will hold 51 percent equities of Yunchu E-commerce. Yunchu E-commerce is an e-commerce company distributing daily necessities including vegetable, rice, oil, etc. in communities. It is accessible via PC, mobile WAP, APP, 400 hotline, etc. The company is a home-kitchen-based transaction platform and also a communities-based social platform. It can help community residential to rebuild neighborhood culture and commercial community to intensify user engagement.
○ Zhengbang Technology to raise over RMB1.1 billion yuan to add stakes in main business
------
Jiangxi Zhengbang Technology Co., Ltd. (002157.SZ) plans to raise 1,138 million yuan by issuing 88.95 million shares at no less than 12.79 yuan per share through private placement to develop pig breeding, construct feed plant and pay off bank loans.
> Three ministries support new energy buses, sales expected to multiply
> Central government to support agricultural e-business, SOA to sea water desalination
> Lanfeng Bio-chemical to acquire Ark Medicine, Jincheng Phar. to acquire Laneva Phar. through private placement
> Sanxia New Building Materials to acquire mobile terminal retailer, Hybio Phar. to invest in chronic disease management
[XFA Focus]
○ Three departments support new energy buses, sales expected to multiply
------
The Ministry of Finance, the Ministry of Industry and Information Technology (MIIT) and the Ministry of Transport jointly released a document on May 14, requiring improving the subsidizing policies on the refined oil products prices for urban buses and accelerating the promotion of new energy buses. Each bus will receive an annual operation subsidy of a maximum of 80,000 yuan and a minimum of 20,000 yuan in the following five years. The document also requires introducing the performance evaluation. Based on the evaluation target, 40 percent of buses to be added and replaced in 10 key provinces and municipalities in air pollution treatment shall be new energy vehicles.
Comment: As the operation lines and time of buses are relatively fixed, they enjoy superior advantages in the promotion of new energy. The Ministry of Transport proposed that the number of new energy buses will reach 200,000 in 2020, but the actual sales of new energy buses in 2014 is less than 20,000. Institutes estimate that the sales of new energy buses of Zhengzhou Yutong Bus Co., Ltd. (600066.SH), Zhongtong Bus Holding Co., Ltd. (000957.SZ) and other leading enterprises are expected to double this year. As for Songz Automobile Air Conditioning Co., Ltd. (002454.SZ) and other accessories providers, the orders from new energy vehicles enjoy higher gross profit than traditional passenger cars. The lithium battery market will also benefit from the process.
[XFA Selection]
○ With the implementation of various policies on maintaining economic growth, the national general public budgetary expenditure increased 33 percent year on year in April, the highest growth in three years.
○ China’s electricity consumption rose 1.3 percent year on year in April. The service industry’s power use hiked significantly.
○ Liu Qibao, minister of the Publicity Department of the CPC Central Committee, participated at the symposium on the development of cultural industry, indicating that it will promote the cultural industry to be a pillar industry in the national economy.
○ Experts at the National Development and Reform Commission (NDRC) indicated that with the acceleration in the implementation of energy channels in the One Belt and One Road initiatives, the oil and gas pipeline construction is likely to see more investments this year.
○ The China Securities Finance Corporation Limited released a document to cancel the restrictions on the term and fees of trans-securities lending, which will solve the lack of securities lending sources in the margin trading market.
○ The H shares issued by Huatai Securities Co., Ltd. (001688.SZ) is highly favored. It may raise the financing amount to 4 billion to 5 billion U.S. dollars.
[Industry Information]
○ Central government to support agricultural e-business, leading enterprises to see more growth opportunities
------
Wu Xiangyun, head of the Department of Economic Construction of the Ministry of Finance, indicated at the national meeting on the e-business in rural areas on May 14 that the central finance will arrange 2 billion yuan special capital in supporting the development of e-business in rural areas. More regions in central and western China and more rural residents, rural residents in old revolutionary bases in particular, will benefit more from e-business.
Comment: Agricultural enterprises will accelerate in the e-business and the central government has been introducing supporting policies. The State Council required actively developing e-business in rural areas recently. The Ministry of Finance arranged 2 billion yuan special capital in supporting the development of e-business in rural areas. Institutes estimate that the agricultural commodities market has a capacity of nearly 1 trillion yuan. The access to the Internet by agricultural enterprises will improve the supply chain, reduce the circulation cost and bring new growth opportunities. In terms of listed companies, Beijing Dabeinong Technology Group Co., Ltd. (002385.SZ) plans to invest 1 billion yuan in the establishment of the agricultural Internet. Jiangsu Huifeng Agrochemical Co., Ltd. (002496.SZ) and the China Association of Pesticide Development and Application jointly established the www.16899.com, an e-business website for pesticide. It accounts for 50 percent equities of the website.
○ SOA to promote maritime enterprises going global, sea water desalination to see rapid development
------
The State Oceanic Administration (SOA) released the ‘Key Tasks in the National Maritime Economic Work in 2015’ recently, proposing that the maritime economic development work shall be fully integrated with the strategic tasks in the 21st Century Maritime Silk Road. It will focus on sea water desalination and maritime biological pharmaceuticals and establish an investment cooperation platform for enterprises to promote the going global of maritime enterprises.
Comment: The sea water desalination will be a key source of fresh water resources in the future and enjoys huge potential. According to relevant plans, the sea water desalination capacity will reach a daily 2.2 million cubic meters by the end of 2015. Among A-share companies, Jiangsu Asia-Pacific Light Alloy Technology Co., Ltd. (002540.SZ) has obtained the invention patent for the “sea water corrosion resistant tubes” and the product has been supplied to large sea water desalination projects. Tianjin Motimo Membrane Technology Co., Ltd. (300334.SZ) is a leader in terms of the water treatment membrane capacity in China and provides reverse osmosis membrane for sea water desalination.
[Announcement Interpretation]
○ Lanfeng Bio-chemical to acquire Ark Medicine
------
Jiangsu Lanfeng Bio-chemical Co., Ltd. (002513.SZ) plans to acquire 100 percent equities of Shaanxi Ark Medicine Co., Ltd. with 1.18 billion yuan, among which, 354 million yuan will be paid in cash and the rest will be paid by issuing 77.34 million shares at 10.68 yuan per share. Meanwhile, it plans to raise a supporting fund of 530 million yuan by issuing 49.63 million shares at the same offering price through private placement. The counterparty promises that the net profit of Ark Medicine from 2015 to 2017 will be no less than 74.72 million yuan, 90.36 million yuan and 110 million yuan, respectively. Ark Medicine enjoys advantage in the manufacturing of anti-senile dementia and antineoplastic medicines. Upon completion, Lanfeng Bio-chemical will expand from chemical raw material and chemical product industry to pharmaceutical manufacturing industry and achieve diversified operation strategy.
○ Jincheng Phar. to acquire Laneva Phar. with RMB2 bln
------
Shandong Jincheng Pharmaceutical and Chemical Co., Ltd. (300233.SZ) plans to acquire 100 percent equities of Beijing Laneva Pharmaceutical and Chemical Co., Ltd. with 2 billion yuan by issuing 64.25 million shares at 31.13 yuan per share through private placement. Meanwhile, the company plans to raise a supporting fund of 300 million yuan from Zibo Jincheng Industry Co., Ltd., its controlling shareholder, by issuing shares at no less than 36.24 yuan per share. The counterparty promises that the net profit of Laneva Phar. from 2015 to 2017 will be no less than 156 million yuan, 187 million yuan and 225 million yuan, respectively.
Laneva Phar. is principally engaged in the production and sales of chemical synthesis medicines, covering gynecology, immune-regulation, anti-anaphylaxis and angiocarpy medicines, etc. Upon completion, the company will see leapfrog development in gynecology, immune-regulation medicines, etc.
○ Sanxia New Building Materials to acquire mobile terminal retailer with RMB3 bln
------
Hubei Sanxia New Building Materials Co., Ltd. (600293.SH) plans to raise 3.04 billion yuan by issuing 510 million shares at 5.96 yuan per share through private placement, among which, 2.17 billion yuan will be used to acquire 100 percent equities of Holpe Commercial Chain Co., Ltd. and the rest will be used to supplement working capital. The counterparty promises that the after-tax net profit of Holpe from 2015 to 2018 will be no less than 154 million yuan, 243 million yuan, 297 million yuan and 331 million yuan, respectively.
Holpe, engaged in the sales of mobile terminal products, digital consumption products and accessories, owns self-owned e-commerce platform, online stores, chain direct-sale stores, etc. The company’s sales volume on mobile phones in 2014 reached 3.1 billion yuan and its online/offline users and members total around 10 million.
○ Hybio Phar. to raise RMB1.9 bln to invest in Internet plus chronic disease management
------
Hybio Pharmaceutical Co., Ltd. (300199.SZ) plans to raise 1.91 billion yuan by issuing shares at 23.32 yuan per share through private placement as scheduled, among which, 710 million yuan will be invested in the “Internet plus chronic disease management platform” and the construction of marketing network which mainly improves the living quality of chronic disease patients by integrating medicine, instrument and mobile Internet, 200 million yuan will be invested in the development of new products and the construction of Research & Development center, and the rest 1 billion yuan will be used to supplement working capital. The actual controller and middle and senior management of the company will participate in the subscription. Investment enterprises under Sinopharm Group and China Minsheng Investment Corp., Ltd. will also be involved in the investment.
○ Jiajia Food to control Yunchu E-commerce
------
Jiajia Food Group Co., Ltd. (002650.SZ) plans to increase capital in Changsha Yunchu E-commerce Co., Ltd. by 50.00 million yuan. Upon completion, the company will hold 51 percent equities of Yunchu E-commerce. Yunchu E-commerce is an e-commerce company distributing daily necessities including vegetable, rice, oil, etc. in communities. It is accessible via PC, mobile WAP, APP, 400 hotline, etc. The company is a home-kitchen-based transaction platform and also a communities-based social platform. It can help community residential to rebuild neighborhood culture and commercial community to intensify user engagement.
○ Zhengbang Technology to raise over RMB1.1 billion yuan to add stakes in main business
------
Jiangxi Zhengbang Technology Co., Ltd. (002157.SZ) plans to raise 1,138 million yuan by issuing 88.95 million shares at no less than 12.79 yuan per share through private placement to develop pig breeding, construct feed plant and pay off bank loans.
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