Main points of investment:
Events. On July 4, 2017, Guangdong Songfa Ceramics Co., Ltd. announced the 2017 restricted Stock incentive Plan (draft), which plans to grant a total of 1.584 million rights and interests to the incentive targets, involving RMB common shares (A shares). It accounts for about 1.8% of the company's total share capital of 88 million shares at the time of the announcement of the draft plan, of which 138.4 million shares are granted for the first time and 200000 are reserved. The price of restricted stock is 16.35 yuan per share. The conditions for the lifting of restrictions on the sale of restricted stocks include corporate performance indicators and personal assessment indicators. According to the draft estimates, the amortized amount of the expenses of this plan amounts to 12.52 million yuan, which is 5.22 million yuan, 6.1 million yuan, 1.04 million yuan and 160000 yuan respectively in 2017, 2018, 2019 and 2020.
Guangdong Songfa plans to implement equity incentives to stimulate the enthusiasm of the management team. Guangdong Songfa plans to grant incentives to the company's directors, senior managers, middle managers, core technical (business) backbone personnel, a total of 75 people; the incentive targets do not include independent directors, supervisors, major shareholders or actual controllers who hold more than 5% of the company, as well as their spouses, parents and children. The main purpose of Guangdong Songfa's formulation and implementation of this equity incentive plan is to further improve the long-term incentive mechanism, attract and retain outstanding talents, and fully mobilize the enthusiasm and creativity of employees. Combine the interests of shareholders, the interests of the company and the personal interests of employees, so that all parties jointly pay attention to the long-term development of the company, and then promote the sustained growth of the company's performance.
At present, the company is in the early stage of educational transformation, and has higher requirements for the enthusiasm and professional ability of the management.
The introduction of equity incentive will help the company to further improve operational efficiency, attract professionals, and lay a solid talent and management foundation for follow-up development and layout.
Profit forecast and investment advice. Based on the company's brand and scale advantages in the ceramic industry, the company is expected to maintain steady growth in the main ceramic industry. At the same time, since the listing, the company has tried many mergers and acquisitions in the education industry, and the persistence of the transformation and layout of the education sector can be seen. From 2016 to now, by investing in enlightened master education and Daigo brothers with significant regional or product barriers, on the one hand, they have brought positive profits and investment returns to the company, on the other hand, they also reflect the company's rigorous and responsible attitude towards education investment. Combined with the investment layout of the company, the past profit trend of the existing main business and target, and the performance commitment of the target counterparty, we estimate that the net profit from 2017 to 2019 will be 67.6 million yuan, 96.59 million yuan and 117.83 million yuan respectively, and the corresponding EPS will be 0.77 yuan, 1.10 yuan and 1.34 yuan respectively. Compared with other transitional education companies, we give Songfa shares a multiple valuation of 2018E35 and give an overweight rating corresponding to the target price of 38.50 yuan per share.
Risk hint. Ceramic main business is not as expected, epitaxial mergers and acquisitions are not as expected, market risk and so on.