Description of the event

On April 6, 2023, the company announced options and equity incentive plans. In total, it plans to grant a total of 1,795 million shares to incentive targets, accounting for 1.34% of the company's total share capital at the time of the announcement; of these, 1,495 million shares were granted for the first time, accounting for 1.12% of the total share capital.

Incident reviews

Option incentives accounted for 0.33% of the total share capital at the time of the announcement, with an exercise price of 63.36 yuan/share; restricted stock incentives accounted for 1.02%: in the stock option incentive portion, it is proposed to grant 440 million stock options, accounting for 0.33% of the company's total share capital at the time of the announcement. Once granted, there are no reserved rights, and the exercise price is 63.36 yuan/share. In the restricted stock incentive portion, it is proposed to grant 1,355 million restricted shares, accounting for 1.02% of the company's total share capital at the time of the announcement; of these, 1,055 million shares will be granted for the first time, accounting for 0.79% of the company's total share capital at the time of the announcement, with a grant price of 31.68 yuan/share.

The motivating target middle and senior management personnel and core technical personnel have work experience in large petrochemical companies:

The incentive plan covers a total of 49 people, including: (1) the company's senior management; (2) the company's middle management, business executives and core technical personnel. The senior managers covered by this plan are Wu Chunye, Zhu Ping, Li Jinge, and Ji Lianglian; among them, Li Jinge was the deputy director of the CEO Office of Satellite Chemical Co., Ltd., and Zhu Ping was the director of the research management department of the Engineering Technology Research Institute of Sinopec Catalyst Co., Ltd. The core technical personnel include Mr. Lin Qingfu, a former vice president of Zhejiang Petrochemical, general manager of the ethylene chemical division/professor-level senior engineer, and vice president of Rongsheng Holding Group. He participated in the Zhejiang Science and Technology Department's 2023 Pioneer Program, high-carbon a-olefin and ethylene-high-carbon a-olefin copolymers.

The performance target is clear. The assessment profit of the 2025 POE project exceeds 700 million yuan: the conditions for the exercise of stock options are that in 2023-2025, the growth rate of the company's main business revenue/net profit returned to the mother will not be less than 10%.

The performance assessment requirements for restricted stock exposure and sales restrictions are that, based on 2022 main business revenue, the growth rate of the company's main business revenue/return net profit in 2024/2025 was not less than 21.0%/33.1%. Furthermore, the subsidiary Petrochemical Technology's 2024 POE project was confirmed by construction, design, supervision, construction and other units to confirm that mid-term delivery was completed, and the POE project was put into operation in 2025. The product was put into market and net profit exceeded 700 million yuan (not including 700 million yuan).

The incentive plan is conducive to binding talents and achieving business goals: (1) fully mobilizing the enthusiasm of the company's employees and effectively combining the interests of the company's shareholders, the company's interests with management and employees; (2) fully mobilizing the initiative and creativity of the motivators to stabilize and attract outstanding talents; (3) enhancing the company's cohesion and competitiveness to ensure the achievement of the company's future development strategies and business goals.

Investment advice

Since the company's POE production progress exceeded expectations, we raised our profit forecast for the company. It is estimated that the company's net profit to the parent company from 2023 to 2025 will be 159/237/948 million yuan, with a year-on-year growth rate of 44.2%/49.1%/300.3%. The corresponding EPS is 1.19/1.77/7.10 yuan, PE is 53.8/36.1/9.0 times, maintaining the “buy-B” rating.

Risk warning

The risk of putting new POE products into production falls short of expectations; the risk of product price fluctuations; the risk of a sharp rise in raw material prices; and industry competition intensifies.