Huatian Technology (002185): Rights issue to optimize capital structure, short-term industry fluctuations do not change the company’s long-term development trend

The company issued a rights issue announcement on June 28. The company announced that it plans to place 2 shares for every 10 shares.

The proportion of 9,327 shares was placed to all shareholders registered on July 2.

Calculated based on the total share capital on March 31, 2019, the total number of allotable shares this time is 624,991,493 shares.

The amount of funds raised from the rights issue will not exceed US $ 1.7 billion, and after deducting the issuance expenses, it will be used to supplement working capital and repay the company’s interest-bearing debt.

Among them, no more than 800 million US dollars are used to supplement working capital, and no more than 900 million US dollars are used to repay the company’s interest-bearing debt.

According to the resolution of the company’s board of directors on June 26, the company’s rights issue price was determined to be 2.

72 yuan / share.

If the actual net funds raised from the rights issue have been planned to be raised, the shortfall shall be resolved by the company.

The expansion of the business scale and the tender offer have driven the company’s debt rate upward. The company’s business has been in a state of continuous and rapid development. After the completion of the non-public offering in 2015, the company’s subsequent project construction mainly raised funds through bank loans. At the same time, the company acquired Unisem in 2018 by a comprehensive offer. The company’s equity, as a result of a tender offer for 800 million new M & A loans, also increased its asset-liability ratio.

The new interest rate for the 2018 fiscal year was denied.

25 trillion, the overall asset-liability ratio was 35.

99% rose to 48.

77%.

From 2016 to 2018, the change trend of the company’s asset-liability ratio was basically the same as that of comparable companies in the same industry, and the company’s asset-liability ratio was at the median level of comparable listed companies in the same industry.

Raising funds through stock placements helps to optimize the capital structure and increase profitability. The integrated circuit packaging and testing industry of the company is a capital-intensive industry, and the company’s gradual expansion of business scale has increased the demand for liquid funds.

From 2009 to 2018, the company’s asset strength was 28.

4%, revenue composite strength 27.

9%.

As of March 2019, the company’s accounts receivable and inventory reached 11 respectively.

900 million and 14.

07 million yuan, infiltrating the working capital.

The scale of interest-bearing debt keeps expanding, and the risk of debt repayment increases. Part of the funds raised in this rights issue are used to repay the company’s interest-bearing debt, which is in line with the state’s “declining leverage” policy and is conducive to alleviating the pressure on the company’s capital needs.

Although the debt financing method provides financial support and guarantee for the company to expand its business scale, it also brings index and financial expenses, which affects the company’s overall profitability.

No more than 900 million US dollars in the first raised funds are used to repay debts and debts, which will help improve the company’s overall profitability.

Short-term industry boom fluctuations do not change the company’s long-term development trend Since the second half of 2018, the integrated circuit industry has entered a gradual adjustment, and the industry boom has declined. The industry performance of comparable companies including Huatian Technology has experienced the earliest decline to a certain extent in 18Q4-19Q1.

With the adjustment and improvement of the industry’s prosperity, we expect that from 19Q2, Huatian Technology’s operating conditions are expected to improve quarter by quarter.

From the perspective of future earnings, Tianshui’s traditional packaging products are mature in technology and customers are stable. The improvement of the industry’s prosperity will be the first to promote the recovery of related operating conditions.

After the acquisition of Unisem, it will be able to quickly expand the company’s operating scale, introduce high-quality overseas customers, and form a synergy and complementarity between advanced packaging technology and the market.

The Nanjing packaging and testing industry base is also expected to complete the construction of the plant by the end of 2019, and form an operating system around 2020, and drive the continued growth of the 武汉夜生活网 parent company’s future performance.

Earnings forecast and rating are calculated based on the number of shares after the issuance of the largest proportion of shares. We estimate that the company’s net profit attributable to the parent will be 4 in 2019-2021.

23, 5.

78, 6.

53 trillion, EPS is 0.

154, 0.

210, 0.

237 yuan, corresponding to PE is 33X, 24X, 21X.

Considering that the business integration after the acquisition of Unisem has achieved a continuous increase in the performance of the parent company, the Nanjing Advanced Packaging and Testing Industrial Base, Baoji Lead Frame and Packaging and Testing Equipment Industrial Base are gradually expected to continue to bring business growth. We are optimistic about the company’s long-term development trend.

Give the company a 19X 36X estimate, corresponding to a target price of 5.54 yuan, maintain “Buy” rating.

Risks suggest that the industry’s prosperity is declining; new customer expansion and capacity release are below expectations.