Introduction to this report:
The company announced a restricted stock incentive plan and plans to grant no more than 3.2 million restricted shares to no more than 66 people.
We believe that this equity incentive further clarifies the company's future development goals.
Key points of investment:
Maintain an “Overweight” rating. The company's main business includes oriented silicon steel and power transmission and distribution equipment. Currently, the price of oriented silicon steel is stable, and the transmission and distribution sector is growing rapidly due to business expansion. We maintain the forecast of the company's 2023-2025 net profit of 3.05/4.06/525 million yuan, corresponding EPS of 0.92/1.22/1.57 yuan. Maintain the company's target price of 18.4 yuan and maintain the “gain” rating.
The equity incentive plan has been implemented, and the future development path is more clear. According to the company's announcement, the company plans to grant no more than 3.2 million restricted shares to no more than 66 people at a price of 8.09 yuan/share. The sales restrictions were lifted for 12, 24, and 36 months, respectively, and the sales restrictions were lifted at 30%, 30%, and 40%, respectively; the conditions for lifting the sales restrictions were that the 2024-2026 revenue growth rate was not less than 30%, 69%, and 119.7% compared to 2023, and the net profit growth rate was not less than 20%, 44%, and 72.8%, respectively.
We believe that the implementation of the company's equity incentive plan has made the market more clear to the company's future development path, and is also conducive to the improvement of the company's long-term incentive mechanism.
The transmission and distribution business is growing rapidly. According to the company's investor relations record table, the company's power transmission and distribution business grew by about 57% from January to September 2023. The transmission and distribution sector is currently full of orders, and the number of fund-raising projects is still increasing, and it was announced earlier that it plans to acquire a total of 79.97% of Yunnan Transformer Electric Company's shares. The company has a 500kv transformer production capacity. It is expected that the company's power transmission and distribution business performance will follow a steady rise in production capacity.
The price of oriented silicon steel remained stable, and production capacity continued to be released. In the first three quarters of 2023, the price of oriented silicon steel fell more than that of raw materials, and the company's profit towards the silicon steel sector declined. However, since November 2023, the price of oriented silicon steel has leveled off. In 2024, the company's fund-raising for silicon steel projects will release an increase, and it is expected that the company's performance in the silicon steel sector may increase steadily.
Risk warning: The progress of the fund-raising project falls short of expectations; it targets the risk of a sharp drop in silicon steel prices.