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Cixing: Benefit Sharing Shows Development Confidence

Event summary:

The company released the draft of employee stock ownership plan: it plans to raise no more than 185 employees to invest no more than 136 million RMB to invest in the shares of Cixing. The plan is to promote the enthusiasm of the company's employees and share the interests of the company. The EPS of 2014-2016 is expected to be -0.37, 0.19, and 0.32 RMB respectively, maintaining the "strongly recommended" investment rating.

Analysis and judgment:

Benefit sharing shows confidence.

The “Yuren No. 1” employee stock ownership plan raises a total of 136 million RMB. The funds are the legal salary of the formal employees, the self-raised funds, and the borrowings of the major shareholders for the employees. Though purchase no more than 14 million shares by major shareholders or the secondary market, the account is 1.7% of the existing share capital. At the same time, the performance requirements for the lifting of the ban were arranged. In 2015-2017, the profits of 150 million, 250 million and 350 million respectively were realized. We believe that the launch of this plan will help motivate the employees of the company and form a benefit sharing mechanism, showing the company's future development confidence.

The main business is clear and the automation layout is getting better and better.

The company's automation layout is becoming more and more perfect, and the machine vision controller is developed on the platform of Dingna subsidiary Suzhou. Cixing has teamed up with Gugao and Eft to join in two key aspects of key components and system integration. It is expected that Cixing Robot will soon achieve revenue of RMB 100 million. In the future, it is expected to become bigger and stronger in Zhejiang “machine substitution” by partner cooperation, regional advantages, customer base, outreach mergers and acquisitions.

The company's loss was about 300 million last year, mainly due to the sharp decline in the market demand of the downstream sweater industry. The buyer's credit risk was released. In the future, with the new products and new markets gradually contributing to the performance, the main business will usher in a reversal. In the future, the replacement of computerized flat knitting machines in the sweater industry, the new areas such as Vietnam, Cambodia and other foreign markets as well as automatic sewing systems and integrated shoe machines will lay the foundation for the company's future growth.

Comply with Internet + Industry 4.0 practitioners.

The Industry 4.0 project of the company's knitting sweater quick customization platform will actively promote the development of the sweater industry and establish a new ecosystem of C2B. The platform will be customized through the integration of intelligent body size acquisition system, virtual try-on system, intelligent technology module, e-commerce platform and garment production automation. It is expected to be quickly promoted with a strong customer base.

Catalyst the stock price and warn the risk

Risk warning: (1) C2B project progress is not smooth

(2) New product performance is unstable

Fourthly, forecast profits and give investment suggestion.

We are optimistic about the company's key components in the industrial automation sector transformation + system integration layout, the main business is about to clear, the buyer's credit risk is released, the expected EPS of RMB 14-16 is -0.37, 0.19, 0.32, maintaining "strongly recommended" investment rating.