Recently, Ruichuang Micro-nano issued an announcement that in order to strengthen the company’s layout in the microwave field and enhance the company’s competitiveness in the microwave field, the company and Shenzhen Xinxi Juxin Investment Partnership (Limited Partnership) (hereinafter referred to as “Xinxi Ju”) Core”) to jointly acquire 71.8704% of the equity of Wuxi China Testing Electronic System Co., Ltd. (hereinafter referred to as “China Testing Electronics”), with a total transaction price of 359 million yuan.
Cooperative acquisition of more than 70% equity of China Test Electronics
Among them, Ruichuang Micro Nano acquired 56.253% equity of China Test Electronics with its own funds of 281 million yuan, and Xinxi Juxin acquired 15.617% of the equity of China Test Electronics with 78.087 million yuan. After the completion of the acquisition, Ruichuang Micronano will become the controlling shareholder of CTI.
According to Tianyancha data, CTI was established in 2006 and is mainly engaged in the research and development and production of microwave electronic products. The products involve microwave front-end, microwave solid-state power amplifier, microwave frequency integrated system, microwave transceiver components (T/R components), and communication , navigation, remote sensing system-level microwave electronic products, etc. The main customers are domestic radar development and production units.
The announcement stated that since its establishment in 2006, CTI has been deeply involved in the microwave industry for more than ten years. It has accumulated profound technologies and products, has a stable customer base and continuous order demand, and benefits from the pull of national defense construction. It has the potential for sustainable and steady development.
Before this transaction, the shareholding structure of CTI was relatively scattered, and the Leihua Electronic Technology Research Institute of China Aviation Industry Corporation (hereinafter referred to as “Leihua Research Institute”) held 28.130% of the shares and was its largest shareholder. In this transaction, Ruichuang Micro Nano and Xinxi Juxin acquired the shares held by other shareholders of China Testing Electronics except Leihua Research Institute. In response to this transaction, the original shareholders of CTI agreed to this equity transfer transaction and waived their pre-emptive rights under the applicable laws and the current effective articles of association of the target company and other relevant documents.
It is worth mentioning that the Leihua Research Institute was established in 1970. It is a technology-leading research institute that integrates airborne radar and avionics technology research, product development, production, testing and service. It is the only aircraft/ The missile-borne radar professional research institute undertakes nearly 100 national cutting-edge technology research, model development and product delivery tasks. The Leihua Research Institute has strong independent R&D innovation capabilities and mass production capabilities. It has a key laboratory of avionics system radio frequency integrated simulation aviation technology and a post-doctoral research station. It has the most advanced microwave antenna testing laboratory and advanced airborne radar and radio frequency. Integrated Systems Laboratory.
The target company has sufficient orders
Financial data shows that China Test Electronics achieved revenue of 187 million yuan, 245 million yuan and 132 million yuan respectively from 2018 to 2020; net profit of 12.9503 million yuan, 24.4966 million yuan and 9.1251 million yuan in the same period. From January to June 2021, CTI’s revenue and net profit were 20.1986 million yuan and -3.9851 million yuan respectively.
In the announcement, Ruichuang Micro Nano specifically explained that the decline in China Test Electronics’ revenue and performance in 2020-2021 was mainly due to the fact that China Test Electronics and a supplier were involved in a contract dispute. The procurement could not be carried out normally, resulting in the inability to complete the production and delivery of a main product of CTI. As of the date of the announcement, China Test Electronics and the supplier have reached a settlement agreement, completed the withdrawal of the lawsuit, and resumed normal operations. At the same time, China Test Electronics has started to develop a second supplier, and it is expected that the procurement dependence on this supplier will be reduced in the future.
Combining the valuation of China Test Electronics’ previous equity transfer, future earnings and the valuation level of companies in the same industry, after negotiation by all parties, the valuation of this transaction to China Test Electronics is RMB 500 million, which corresponds to the transaction price of 71.8704% of the equity. 359 million yuan. Previously, China Test Electronics completed the previous equity transfer in August 2016, with a valuation of RMB 450 million.
In terms of future revenue, China Test Electronics recently signed an order contract for microwave transceiver components with a major customer, with a delivery period of 2022-2024. CTI has also received other orders recently. Benefiting from its deep accumulation and strong demand in the microwave industry, the target company has sufficient orders and great potential for future development.
The announcement pointed out that there is a certain gap between the current profitability of China Test Electronics and other companies in the same industry, after the completion of this transaction. CTI is included in the listed company, and the company will send an excellent management team to participate in the daily operation and management of the target company, improve the operating efficiency of the target company, and improve the profitability of the target company. In addition, the company signed a strategic cooperation agreement with the former largest shareholder of CTI, Lei Hua Research Institute. The two parties will jointly support the development of the target company and build CTI into an important enterprise in the domestic microwave and radio frequency industry. The company and Lei Hua The strategic cooperation of the institute will greatly enhance the future value of CTI.
In terms of the valuation level of companies in the same industry, China Test Electronics is in the microwave industry, and listed companies in the same industry include Raiden Micropower (301050), Tianjian Technology (002977), Yaguang Technology (300123) and so on. As of the close of trading on September 30, 2021, the PE (TTM) of Raiden Micropower, Tianjian Technology, and Yaguang Technology were 138, 49, and 263 times, respectively. The valuations of listed companies in the same industry are generally higher.
Transversely cut into the microwave field
Ruichuang Micronano pointed out that in recent years, the company has adhered to technology leadership and technology leadership, implemented a vertically integrated business model, based on the infrared field to become better, and horizontally expanded into other fields to become stronger. In terms of entering the microwave field horizontally, the company has formed a complete R&D team after early layout and team building, and has completed Ku series microwave T/R components, feeder networks, waveguide slit antennas, wave-controlled power supplies and other components and extensions , The development of microwave security radar machine.
As a new entrant in the microwave field, the company has a limited accumulation of technologies, products and customers. As an enterprise that has been deeply involved in the microwave field for more than ten years, CTI has a stable customer base and continuous demand for orders. This transaction is an important measure for the company to further improve and enhance its industrial development layout. It is in line with the company’s overall development strategy and will play a certain role in promoting the company’s business layout and industrial synergy.
However, a reporter from Securities Times · e company noticed that there was no performance commitment or gambling arrangement in this transaction. If the performance of China Test Electronics did not meet expectations, there was no mechanism for transaction consideration adjustment or share repurchase. Rui Chuang Micro Nano reminded that there is a risk of loss or even the unrecoverable investment funds in this investment.
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