Kun Heng Shunwei announced an equity incentive plan. On February 4, 2024, the company announced the 2024 restricted stock incentive plan (draft), which is 569,000 restricted shares to be awarded, accounting for 0.68% of the company's total share capital on the day the draft incentive plan was announced; the grant price was 33.80 yuan/share, and the sales restrictions were lifted for 24/25/26 years, respectively, mainly based on revenue as an assessment indicator, requiring revenue during the vesting period to increase 30%/69%/119.7% year-on-year, respectively, compared to 2023, which is 30% CAGR of revenue for 3 years. A total of 54 people were awarded incentives for the first time in this incentive plan, accounting for 41.22% of the company's total number of 131 employees as of December 31, 2023, including the company's senior management and core technical personnel. We believe that this incentive staff account for a relatively high proportion and cover more core R&D personnel (1H23 R&D personnel account for about 48.41%), which not only shows the company's importance to the core team, but also shows confidence in development over the next 3 years.
Continued expansion of product lines led to rapid revenue growth. We believe that the company's revenue growth is mainly due to the continuous enrichment of application scenarios for wireless channel simulator products, leading to the continuous expansion of the downstream marketable market. At present, the company has made important breakthroughs in the satellite communications, semiconductor and other markets. At the same time, the company has a broad market for RF microwave signal generators and other products.
High specifications, platformization, modularity, and localization are the development trends of the industry. With the development of radio technology, continuous changes in downstream demand place high demands on the performance and iterative ability of test instruments, and platformization and modularity have become an inevitable trend in the development of test instruments. China's test simulation instrumentation industry has always been dominated by middle- and low-end products. Homogenization competition is fierce, and the high-end test simulation instrument market is monopolized by major foreign manufacturers.
With the development of technology in the radio field in China, the gap between relevant radio equipment and developed countries has gradually narrowed, and even some technologies are ahead of foreign countries, which has led to continuous breakthroughs in domestic testing and simulation technology, gradually realized localization, and the future market space for domestically produced instruments is broad.
Investment suggestions: Benefiting from large-scale applications of 5G-related communication equipment (such as base stations, mobile phones), the Internet of Things, and the Internet of Vehicles, etc., considering the continued growth in the market share of the company's core products and the gradual expansion of new products, we expect the company's revenue to be 2.85/375/475/495 million yuan respectively in 23-25 years, and net profit to mother of 1.03/1.34/175 million yuan respectively, corresponding to the closing price on February 06, 2024. P/E is 30x/23x/18x, respectively, maintaining the “recommended” rating.
Risk warning: Downstream demand falls short of expectations, new product development progress falls short of expectations, and new product release speed falls short of expectations.