Incident Overview
On February 5, 2024, Kun Heng Shunwei announced the 2024 Restricted Stock Incentive Plan (draft), which plans to grant 469 million restricted shares to 54 people, including senior management, core technical personnel and other personnel, accounting for 0.56% of the company's total share capital. The grant price of this equity incentive is 33.80 yuan, and sales restrictions will be lifted in three stages 2024/2025/2026. The target value for performance assessment is based on 2023 revenue, and the company's 2024-2026 revenue growth rate will not be less than 30%/69%/119.7%, respectively.
Equity incentives released, demonstrating confidence in rapid development
In terms of incentive targets, this equity incentive covered a total of 54 people, including the company's senior management, core technical personnel, and others that the board of directors believes need incentives, accounting for 47% of the company's total number at the end of 2022. The proportion is high. It has a positive effect on stabilizing core employees and is a strong guarantee for the company's long-term development. Judging from the grant price, the grant price of this equity incentive is 33.80 yuan, which is relatively close to the company's current stock price, reflecting the company's judgment on its own reasonable value in the medium to long term. Judging from the conditions for lifting the sales restriction, the current equity incentive will lift the sales restriction in three stages in 2024/2025/2026. The target value is based on the 2023 revenue. The company's 2024-2026 revenue growth rate will not be less than 30%/69%/119.7%, respectively, that is, the compound growth rate will reach 30%, and the compound growth rate corresponding to the trigger value will be about 22%. Overall, while ensuring the stability of the company's core talent team, this equity incentive also shows the company's confidence in its current self-worth and maintaining rapid development over the next three years.
The downstream application of test systems continues to expand, and satellite Internet “sellers” are the first to benefit. According to the three-quarter report, the company's new product spectrum analyzer has been gradually introduced to various downstream users for testing and trial use, and certain orders have been formed. At the same time, with the enrichment of the product matrix and the accumulation of industry applications, the company's various system-level overall solutions have become prominent, which can better meet the testing and simulation needs of customers in various industry units and various field application scenarios. Looking further, as a “seller” of satellite internet, whether at the R&D stage or production stage of satellite payloads, they need supporting electronic measuring equipment to support them. Since satellite internet is a segment of the communications industry, the company's main products, wireless channel simulators, and test and measurement systems will fully benefit from its previous market position in the communications industry and reduce the difficulty of introduction. Judging from the pace, generally speaking, the demand for measurement equipment will be ahead of the downstream industry's release cycle, and with the successful launch of two satellite Internet technology test satellites in July 2023, China's satellite Internet has begun to enter the substantial construction stage, and the company is expected to take the lead in benefiting from the rise in industry prosperity.
Investment advice:
Kun Heng Shunwei is a pioneer in the field of high-end radio testing and measurement in China. Currently, it is undergoing a comprehensive upgrade of the customer system+product matrix+business model. The company's products focus on the high-end market, maintain high R&D investment, continue to launch new products, open up market space, and drive medium- to long-term performance growth. Taking into account the additional costs of equity incentives, we expect the company's revenue for 2023-2025 to be RMB 2.83/3.73/505 million, respectively, and net profit to mother of RMB 0.95/1.21/158 million, respectively. Maintaining the buy-A investment rating, the 6-month target price is $57.2, which is equivalent to a dynamic price-earnings ratio of 40 times in 2024.
Risk warning: 1) Risk of new product development falling short of expectations; 2) risk of limited supply of upstream raw materials and devices; 3) risk of market and channel development falling short of expectations; 4) risk of downstream market demand falling short of expectations.