Guangdong Songfa Ceramics Co (603268.SS): Announced Rmb0.5-1bn share buyback program and change of company name; Buy

Post market close on Nov 7th, Songfa/Hengli Heavy Industry announced a Rmb0.5-1.0bn share buyback program at a maximum price of Rmb260/share, which is based on no more than 150% of the past 30-day average price per management. The company noted the buyback reflects management confidence in its outlook and value, while supporting investor confidence and share-price stability; repurchased shares will be used for employee stock ownership plans or equity incentives. Based on the Nov 6th closing price of Rmb149.45/sh, the program implies c.3.35-6.69mn shares, equivalent to 0.33%-0.66% of total shares or 1.44%-2.88% of free float, vs. c.8.0mn shares of average daily turnover since Apr 17 when the company was approved to remove the delisting risk warning. The program has been approved by the board to be executed within 12 months, and comes on top of the ESOP which calls for maximum funding of c.Rmb852mn to conduct share buybacks from the secondary market. We view the buyback program as positi