Hangfa Power (600893): Market-oriented debt-for-equity conversion helps the company consolidate its foundation and release its performance
The report reads the company ‘s recent plans to issue shares to purchase assets and related transactions: Date Guofa Fund, National Military-civilian Integrative Industry Investment Fund, and other institutions to increase capital in Liming, Liyang Power, and Southern Company in cash and debt, totaling US $ 6.5 billion.At the same time, China Aviation Development Corporation’s internal exclusive capital reserve formed by state-allocated funds totals.800 million increase capital and acquire equity in three companies.After the completion of the capital increase, Hangfa Power intends to issue shares to the above institutions to acquire all the equity of the three companies it holds.The company’s implementation of market-oriented debt-to-equity swaps will help reduce the debt burden of related subsidiaries, improve the company’s asset-liability ratio, save financial costs, and help the company’s long-term development. Investment points The company is the only integrated platform for the aviation equipment group’s assets. The company is a listing platform for aviation engine and gas turbine manufacturing assets of the aviation group. The engine type has achieved the full variety of turbofan, turbojet, turboshaft, turboprop and piston coverage.In addition, the aviation development group still has assets such as Dongan Company, Lanxiang Machinery, and Research Institutes 606 and 608, which have not been securitized, and the possibility of continuing to use Aviation Development Power as a platform for asset integration will not be ruled out in the future. The rapid progress of domestic aero engine localization has already advanced the ability to independently develop and manufacture advanced aero engines.At present, domestic-made imitation aviation and Taihang series engines with independent intellectual property rights can basically meet the domestic demand for military machinery power. And the company’s current production and research engine models can cover all military and civilian aircraft models, and can form a good model conversion rhythm in the future.We expect that the gradual improvement of the domestic production of aero engines will accelerate and the company’s business scale will usher in rapid growth. Earnings forecasts and projections As the localization of long-term aero-engines continues to deepen, new military aircraft and equipment units accelerate; at the same time, the company’s asset structure is further optimized through debt-to-equity swaps to promote the 南京桑拿网 release of performance.We expect the company’s business scale and earnings to continue to grow at a relatively rapid rate in the future, and upgrade its aviation power to a “buy” rating.Corresponding company EPS for 2019-2021 is 0.54/0.69/0.79 yuan / share, corresponding to 42/33 / 29X PE. Risk warning: Military orders are not up to expectations; product development progress is slow.