Events:
On the evening of September 15, 2023, Weir issued the 2023 equity incentive plan:
1) Phase I: no more than 7.72 million stock options will be granted to the incentive targets, accounting for 0.65% of the company's latest total share capital. The recipients include director Jia Yuan (120000 shares), director Wu Xiaodong (60,000 shares), general manager Wang Song (60,000 shares), Dong Mi Ren Bing (50,000 shares), and 781 middle managers and core technical personnel (7.43 million shares).
2) Phase II: no more than 12.28 million stock options will be granted to the incentive object, accounting for 1.04% of the company's latest total share capital, and 2126 middle managers and core technicians will be granted.
The exercise price of stock options in both phases of the incentive plan is 78.97 yuan per share (the company's latest closing price is 93.46 yuan per share). After one year from the date of grant, the exercise price can be divided into three times in the next 3 years, with an exercise ratio of 30%, 35% and 35%, respectively, with a maximum validity period of no more than 4 years.
Comments:
Performance evaluation objectives: the assessment year of the two incentive plans is 2023-2025, which is mainly aimed at the company's semiconductor design business income. The targets are: 2023: 18 billion yuan; 2024: 175-20 billion yuan; 2025: 195-22 billion yuan. (the company's semiconductor design business income from 2020 to 2022 was 17.267 billion yuan, 20.38 billion yuan and 16.407 billion yuan respectively.) 50MP products broke the high end, with different pixel sizes seizing the market segment. 1) OV50H:2023 was released in January of this year, with a 1.28in outsole and 1.2um pixel size, focusing on the outsole and large pixel market, Sony, which grabs the main photo share of more than 3k smartphones; 2) OV50D:2023 released in June, with a 1Accord 2.88inch sensor and 0.612um pixel size, focusing on the small pixel market, Samsung, seizing the main photo share of smartphones below 2k 3) OV50A/OV50E:2021 developed the first 50MP product, OV50A, in February of this year. The sensor 1max 1.55in, single pixel size 1um, and iterated OV50E in August 2022, mainly hit the pixel size market. 4) OVB0B/OVB0A/OVA0B:2022 released the first 200-megapixel small pixel product OVB0B in January of this year, with a 1.28-inch backdrop. In August of the same year, it released the second 200-megapixel product OVB0A, and in March 23, it released a new 100-megapixel product, OVA0B, which continues to boost the 100-megapixel market.
The incentive goal is clear, the exercise price is reasonable, and the future growth can be expected. We believe that the company's incentive plan clearly sets a strict target for the continuous growth of revenue in the semiconductor design business in the next three years, and provides option incentives to the core staff at a relatively reasonable discount, which can ensure the implementation effect of the incentive to a greater extent, enhance the incentive object's work enthusiasm and sense of responsibility, so as to promote the realization of the incentive goal. At the bottom of the current industry cycle, the company's inventory removal is relatively smooth, superimposed 50MP new products continue to release volume in the consumer electronics peak season in the second half of the year, in addition, automotive CIS, TDDI, CAN/LIN and other business lines are making steady progress, we are optimistic about the gradual improvement of the company's performance and achieve rapid growth in the future industry upward cycle.
Profit forecast and investment advice: we estimate that the company will achieve operating income of 211.9% 2640 million yuan respectively in 2023, an increase of 5.5%, 24.6%, 19.0%, and a year-on-year increase of 14.1%, 32.9%, 50.7 billion, and 42.8%, 133.0%, 53.8%, respectively. The current stock price corresponds to 2023, 2024and 2025, respectively, with a PE of 78, 32.9, 22X. The valuation for the next two years will be more attractive and the "highly recommended" rating will be maintained.
Risk tips: inventory elimination is not as expected; high-end CIS applications are not as expected; car intelligence is slowing down.