AVIC Optoelectronics (002179): Focusing on the conversion premium of photoelectric conversion bonds, the stock market may usher in a short window of allocation

AVIC Optoelectronics (002179): Focusing on the conversion premium of photoelectric conversion bonds, the stock market may usher in a short window of allocation

Investment highlights: Event: The company issued the first redemption announcement of “optical conversion bonds”: the company’s stock closed on 15 trading days for 30 consecutive trading days from August 2, 2019 to September 12, 2019The price is not less than 40.

13 yuan / share, has triggered a conditional redemption clause.

On September 16, 2019, the company’s consolidated board of directors passed a relevant resolution and decided to exercise the conditional redemption right of “optical-to-electrical debt”.

Converted debt redemption background profile: AVIC Optoelectronics (002179.

SZ) publicly issued 13 million convertible bonds on November 5, 2018, each with a face value of 100 yuan, with a total issuance of 1.3 billion U.S. dollars, with a maturity of 6 years.

Photoelectric to debt (128047.

SZ) was listed on the Shenzhen Stock Exchange on December 7, 2018, and entered the conversion period on May 9, 2019. The initial conversion price was 40.

26 yuan / share.

On May 16, 2019, the company implemented the 2018 equity distribution, and the conversion price of photoelectric conversion bonds was adjusted to 30.

87 yuan / share.

The compulsory redemption clause stipulated in the company’s “Prospectus” 深圳养生会所 is: After the convertible bonds are terminated or the compulsory redemption conditions are triggered, the company will redeem all unconvertible convertible bonds at the par value of the bond (100 yuan) plus the currentAccrued interest rate, which will be much lower than the market value of the underlying stock.

The compulsory redemption condition is: during the period from May 9, 2019 to November 5, 2024, if the company’s stock meets at least 15 trading days out of 30 consecutive trading days, the closing price is not lower than the current conversion price30 years old

130 yuan (including 130%) at 87 yuan / share, or 40.

13 yuan / share.

Details of the redemption system for convertible bonds: According to the Shenzhen Stock Exchange, after the company decides to redeem the redemption right, it should be released at 武汉夜生活网 least within five trading days after the first redemption condition is met (that is, September 16 to September 20, 2019)The three redemption implementation announcements announced the relevant redemption of the holders of the “optical conversion bonds”.

The announcement of the first redemption of convertible bonds clarifies the redemption registration date, redemption procedures, and other redemption procedures and time schedules. The specific content is as follows: (1) “Photoelectric Convertible Bonds” redemption registration date: October 29, 2019, The company will refund the full refund to the “Photoelectric Convertible Bonds” (2) “Photoelectric Convertible Bonds” registered on the redemption registration date after the market closes. Redemption date: October 30, 2019 (3) “Photoelectric Convertible Bonds”Redemption price: 100.

20 yuan / Zhang (including current accrued interest, the current annual interest rate is 0.

2%, and the current interest rate includes tax), the company will redeem all unconvertible convertible bonds at that price on the redemption date. (4) “Photoelectric Convertible Bonds” Stop Trading Day: October 16, 2019.The trading hours of the announcement date of the reversion announcement to October 15, 2019, the “optical conversion bonds” can still be traded normally. (5) The “optical conversion bonds” will stop the conversion date: October 30, 2019, published in the redemption announcementDuring the trading hours from October 29, 2019, the “optical conversion bond” can still be converted normally. If you choose to participate in compulsory redemption and conversion, you must ensure that the market closes on the registration date (October 29, 2019).Former holders of “optical conversion bonds”, according to the convertible bond T + 0 trading system, can choose to buy at the latest trading time on the day of redemption registration and hold to close.

Until October 15, 2019, holders can still choose to trade convertible bonds. Until October 29, 2019, holders can still carry out conversions. If held to the redemption date, all the shares heldConvertible bonds will be forcibly redeemed.

Discussion on the arbitrage of the convertible bond system: For investors, if they choose to participate in the compulsory conversion of shares, they need to ensure that they hold “optical convertible bonds” before the close of the redemption registration date (October 29, 2019).Debt T + 0 trading system, you can choose to buy at the latest trading time on the day of registration of the refund, and hold it until the market closes.

Until October 15, 2019, holders can still choose to trade convertible bonds, and until October 29, 2019, holders can still convert into shares.

According to the manifestation, according to the closing data on September 18, 2019, AVIC’s closing price was 41.

41 yuan / share, the current price of photoelectric conversion bonds is 133.

80 yuan, the calculation can get the expected increase of 134.

14 yuan, conversion price premium -0.

26%; As the current conversion premium of the photoelectric conversion bonds is negative and the absolute value is reduced, there is significant room for cross-market arbitrage.

The specific calculation method for the conversion premium rate is: suppose you buy a conversion bond now, one 133.

80 yuan, each can turn 100/30.

87 = 3.

24 shares, according to the latest closing price of the main stock of AVIC, 3.

Market value of 24 shares 3.

24 * 41.

41 = 134.

14 yuan; therefore, the corresponding conversion premium 133.

80/134.

14-1 = -0.

26% (the specific calculation method for the conversion premium is shown here).

Discussion on conversion bond investment opportunities: Focus on changes in the conversion premium rate. If this indicator is negative in the future and the absolute value is sufficient to measure, investors can consider the following arbitrage strategies between convertible bond market and stock market:The latest conversion premium rate, before the day of October 16, 2019, in the bond market, waiting for machines to buy “optical conversion bonds”, assuming the conversion premium offsets the negative and the absolute amount is large enough. Considering transaction costs, liquidityAnd other trading mechanisms. Before the redemption date, the debts will be held in accordance with the requirements to convert into shares, and then the shares will be sold in the underlying market. It is expected that there may be cross-market arbitrage between the bond market and the stock market. Investment risk and tradingCosts please investors to pay attention.
(2) Considering that there may be a certain selling pressure after the conversion, investors can consider selling short stocks in the stock market and waiting for the opportunity to buy “photoelectric conversion” on the bond market before October 16, 2019.Debt “, taking into account transaction costs, liquidity and other trading mechanisms and expenses, convert the holding bonds into shares before the refund date, and then buy and return the stocks to the stock market. It is expected that there will beInvestors should pay attention to the possibility of cross-market arbitrage, investment risks and transaction costs.
Maintain profit forecast and buy rating.

Maintain the company’s net profit attributable to mothers for 19/20/21 years at approximately 12.
.

51/17.

60/22.

310,000 yuan, the EPS in 19/20/21 is about 1.
.

22/1.

71/2.

17 yuan / share, currently sustainable (2019/09 / 18,41.

41 yuan / share) corresponding PE is 34/24/19 times.

The company is an outstanding enterprise in the world connector industry and domestic defense technology industry that has both product competitive advantages and perfect governance structure. The company is in the acceleration phase of a new round of military procurement expansion cycle, and merges new products into production.Cycle; the company continues to optimize the customer structure of civilian products and control production costs, promote product upgrades and category expansion, and its profitability of civilian products may be further opened.

Considering that the compulsory redemption may save the company more financial costs, as well as the dual dividends of demand release and autonomous controllable policies for military industries and EV, 5G and other demand releases that are expected to benefit in the future.

Therefore, maintain BUY rating.

Risk reminders: 1) Uncertainty of order release rhythm and order confirmation progress in the downstream military and civilian products industry; 2) Risks of new business and overseas business market development; 3) Risk of squeezed profit margins due to fierce industry competition; 4)The risk of falling profitability caused by the decline in the proportion of new products; 5) New energy vehicles or communications 5G civilian products profitability improvement pace is not as expected.