What's new

The company plans to acquire 49% stake in Bingshan MetalTechnology (BSMT) and 76% stake in Bingshan Engineering &Trading (BSET) from its parentco Bingshan Group forRmb172.95mn and Rmb56.15mn respectively, and use no morethan 25mn shares of Guotai Junan Securities it holds for lending.

Comments

BSMT has been a “cash cow” for Bingshan Group.

BSET will be engaged in both export and procurement,helping to improve efficiency.

Securities lending will help improve the efficiency of resource utilization.

The timing of resource consolidat ion is earlier than expected and we look forward to further moves.

Valuation and recommendation

As the acquisitions have not been completed, we temporarilykeep earnings forecasts unchanged. We maintain BUY withA-share TP of Rmb13.5 (implying 43x 2017e P/E, or 36x on apro-forma basis if considering the acquisitions) and B-share TP ofHK$7.2 (implying 21x 2017e P/E, or 17x on a pro-forma basis ifconsidering the acquisitions).

Risks

Cold chain industry development or M&A missing expectations.