Shenzhen MTC Co Ltd:Shenzhen MTC extends validity of non~public offering to advance its smart TV operation发布时间：2016-10-12 研究机构：瑞银证券
One-year extension of validity period of non-public offering
Shenzhen MTC announced that its shareholders' general meeting approved theextension of the validity period of its non-public offering (adopted in November 2015)to within the next 12 months. The company's planned non-public offering of 240mshares at Rmb12.28/share is set to raise Rmb2.94bn, with Oriental Pearl (Rmb2.2bn)the targeted main subscriber, followed by Haier and Gome (Rmb370m each). Althoughit was approved by the CSRC in July 2016, the additional placement is not complete,which we believe could be due to the big difference between the share price and theoffer price. The extension of the validity period approved by the shareholders' generalmeeting will grant the board of directors more time to complete the placement.
Funshion TV has mediocre sales volume; may weigh on short-term earnings
With its acquisition of Funshion Online completed, the company has entered the videoindustry. Its main strategy is to expand Funshion Online's subscriber base/operationalcapacity by increasing smart TV sales. In late 2015, it launched Funshion TV, mainly soldonline. However, the business has incurred losses amid tough competition due to theentry of numerous internet TV brands, with c200k units sold so far. The company willdevelop an offline dealer channel to improve profitability. We think Funshion TV salesare unlikely to grow sharply in the near term, as setting up an offline dealer networktakes time. The additional placement may give the network a boost when completed.In an intense competitive environment, Funshion Online may continue to incur lossesdue to high operating costs that weigh on overall earnings.TV business may be affected by rising LCD panel prices
Regarding the company's original businesses, TV sales have basically emerged from theimpact of last year's factory relocation, with revenue starting to resume growth.
Meanwhile, due to the continuous depreciation of the RMB year to date, we expect agreat reduction in FX losses, which had a big impact on last year's earnings. However,we expect gross margin to be impacted by rising panel prices in Q4. The revenue of settopboxes has grown rapidly, mainly driven by the development of internet customers.The LED lighting business is now listed on the New Third Board and is likely to grow ata quicker pace if financing proves to be successful.。
Valuation: We maintain our earnings estimates and Neutral rating。
We maintain our earnings estimates. Our DCF-based price target of Rmb8.40 assumes6.7% WACC. We maintain our Neutral rating.