Wingtech Technology's acquisition of Anshi Group has been approved by the China Securities Regulatory Commission, and 5G and semiconductors are developing together

Wingtech Technology released an announcement on "The issuance of shares and payment of cash to purchase assets and raise supporting funds and related transactions have been approved by the China Securities Regulatory Commission". The company's acquisition of Nexperia Semiconductor has received approval from the China Securities Regulatory Commission.

Approved to issue 403 million shares to 10 trading partners including Gree Electric

According to the approval document of the China Securities Regulatory Commission, Wingtech Technology was approved to issue a total of 403,400,589 shares to 10 transaction parties, including Wuxi Guolian Integrated Circuit Investment (Limited Partnership), Zhuhai Ronglin Equity Investment Joint Venture (Limited Partnership), Zhuhai Gree Electric Appliances Co., Ltd., and Shanghai Pengxin Zhipeng Investment Center (Limited Partnership), to raise supporting funds of no more than 7 billion yuan.

Regarding the strategic significance of this reorganization, Zhang Xuezheng, Chairman of Wingtech Technology, said that Nexperia is a global leader in upstream core components such as logic chips, discrete devices and power semiconductors, and Wingtech Technology has world-leading technology in downstream system design of smart terminals. After the completion of this asset integration, the two parties will generate synergy in multiple levels such as business, technology and customers.

Profitability can exceed borrowings, and many brokerages have expressed optimistic views

The reporter found that since the plan was unveiled, the market has maintained a high level of attention to its acquisition scale and debt repayment ability. Since the plan was reviewed by the China Securities Regulatory Commission on June 5, in order to more comprehensively answer the questions of concern to the market, Wingtech Technology gave a detailed explanation on June 10 on the sources of debt repayment funds and repayment ability of domestic and foreign debts generated by this reorganization, as well as the impact on the listed company's improvement of financial conditions and enhancement of sustainable profitability. The announcement shows that after excluding the impact of non-recurring income such as asset divestiture, it is conservatively calculated that according to the historical operating conditions of the listed company and Anshi Group, it is expected that the surplus funds generated by the normal operation, investment and financing activities of the listed company and Anshi Group in 2019 and 2020 will be able to fully cover the principal and interest repayments of 5.16 billion yuan of domestic loans and 5.632 billion yuan of overseas loans in 2019 and 2020. The repayment of the above domestic and foreign loans has little impact on the operating conditions of the listed company and Anshi Group.

In addition, with the large-scale promotion of 5G commercialization and the gradual release of synergy between the listed company and Anshi Group, the overall profit scale of the listed company is expected to increase significantly in the future. In addition, as the profit scale of Anshi Group expands, it can distribute dividends to the listed company if it has sufficient funds to support the listed company in repaying domestic loans. The above factors provide multiple guarantees for Wingtech Technology's repayment of domestic and foreign debts.

Since the company's restructuring was approved, many institutions including Southwest Securities and CITIC Securities have issued research reports on the company's restructuring and given a "buy" rating. Among them, CITIC Securities Research believes that Wingtech Technology has accelerated its entry into the supply chain of well-known customers at home and abroad, and terminal products have been gradually shipped. The company's EPS forecast for 2019/2020/2021 is maintained at 0.80/1.19/1.44 yuan. Assuming that the acquisition of Anshi is completed and consolidated in 2019, the EPS forecast for 2019/2020/2021 is maintained at 1.34/1.68/1.94 yuan. Based on the valuation of the EPS forecast, Wingtech Technology is given a PE of 32 times in 2019, corresponding to a target price of 42.88 yuan, and a "buy" rating is maintained.

Successfully acquired a world-class semiconductor company, with leading products and production capacity in the world

As a world-class semiconductor company, Nexperia has an industry chain consisting of "semiconductor design + wafer manufacturing + packaging and testing + integrated circuit equipment + sales department". According to a research report by Southwest Securities, in 2018, Nexperia had a global market share of 14%, ranking first in diodes, second in logic devices, second in automotive MOS tubes, and third in small-signal MOS tubes. Its total production in 2018 exceeded 100 billion pieces, ranking first in the world.

At the same time, Nexperia has added more than 700 new products each year in the past two years, and its innovation capabilities are leading the world. In 2019, Nexperia was also the first in the world to start mass delivery of GaN power semiconductor products GaN FET, becoming the only compound power semiconductor company in the industry to deliver mass production to customers.

Gallium nitride (GaN) is a new generation of wide bandgap semiconductor materials. Its bandgap width is almost three times that of Si and twice that of gallium arsenide (GaAs). Its critical breakdown electric field is one order of magnitude larger than that of Si and GaAs, and it has higher saturated electron mobility and good temperature resistance. As Si materials reach their physical limits, it is imperative to find the next replacement driven by Moore's Law. Gallium nitride is considered to be the first choice for future semiconductor materials due to its excellent electrical properties in all aspects. Traditional semiconductor manufacturers are constantly acquiring, cooperating and licensing agreements on gallium nitride devices, and gallium nitride power semiconductors have become a battleground for all companies.

According to the prediction of Yole, a well-known market research organization, the implementation of 5G networks will drive the growth of the GaN market from 2019 to 2020. It is expected that the GaN market will exceed US$3 billion in the next 10 years. In this context, Nexperia, as the first company in the world to mass produce, will have an absolute first-mover advantage.

As a pilot member, we signed the only 5G project of "2019 Yangtze River Delta G60"

As the world's largest ODM company with the largest mobile phone shipments, and also the only company in the industry with its own mold factory and complete intelligent production line, Wingtech Technology has continuously made breakthroughs in market technology since its establishment. From single-chip dual-SIM dual-standby technology to the current flexible folding screen mobile phone, the company has continuously provided innovation and convenience to the market through its leading technology research and development advantages, leading the industry's technological changes. It is worth mentioning that as a strategic partner of Qualcomm and a key partner of 5G Alpha, Wingtech has taken the lead in launching the research and development of 5G products, and will release Qualcomm Snapdragon 855 chip platform 5G smart terminal products worldwide!

As a member of Qualcomm's 5G pilot program, Wingtech Technology has already reached strategic cooperation on 5G smart terminals with China Mobile, China Unicom, and China Telecom, the three major operators. At the same time, it took the lead in introducing 5G into the industrial manufacturing field with a forward-looking perspective, and jointly explored the deep integration of 5G technology and the industrial field with Baosteel Software, a subsidiary of China Baowu, China's largest steel company. And just one day before receiving the approval document, at the 2019 Yangtze River Delta G60 Science and Technology Innovation Corridor Joint Conference on June 24, the only 5G project among all the major projects signed on the scene was reached by Wingtech and Minsheng Bank. According to the agreement, Minsheng Bank will support Wingtech Communication's 5G smart terminal R&D and manufacturing project through industrial integration cooperation. The project has a total investment of 5 billion yuan, mainly including the R&D and manufacturing of various innovative products such as 5G mobile phones, 5G IoT, and 5G PCs.

In the future, Wingtech Technology will leverage the cluster advantages of Nexperia and multiple strategic partners to gradually extend its own industrial chain horizontally and vertically, forming an integrated R&D and manufacturing of chip design, wafer manufacturing, semiconductor packaging and testing, industrial Internet of Things, edge computing, communication terminals, laptops, IoT, and automotive electronic products, with 5G and semiconductors flying together.