Incident: Recently, the company announced the 2024 Restricted Stock Incentive Plan (draft). The total amount of restricted shares to be granted under the incentive plan does not exceed 3 million shares, accounting for 1.14% of the company's total share capital. Of these, 2.6 million shares were granted for the first time, and 400,000 shares were reserved.
The target growth rate of equity incentives is relatively positive, demonstrating confidence in long-term development. The incentive targets covered by this incentive plan are a total of 17 company directors, senior management, and core technical (business) executives. The company-level performance assessment requirements are: 1) 100% ownership coefficient: 2024-2028 net profit 1 is not less than 1.34, 1.83, 2.32, 3.01, and 40 billion yuan, respectively; 2) ownership coefficient 80%: 2024-2028 net profit is not less than 1.206, 1.647, 2.088, 2.709, and 360 billion yuan, respectively. The equity incentive plan is based on net profit as the assessment target, and is included in 5 business years. The target compound annual growth rate is about 30%, reflecting the management's confidence in the company's long-term development.
Consumption of probiotics has maintained rapid growth, which has strongly promoted the upgrading of the business structure. As consumers' awareness of health increased, the attention and recognition of probiotic products also increased. The company accumulated and strengthened marketing with core technology, and the edible probiotic business continued to grow rapidly. 2019-2023H1's share of edible probiotics revenue increased from 6.46% to 61.64%. The company's edible probiotic products mainly include food-grade probiotic raw material bacteria powder for corporate customers and the “Yishiyou” brand series probiotic terminal consumer products for end consumers. In terms of customer structure, according to the 22nd annual report, B-side customers contribute the main revenue. Some large dairy companies, pharmaceutical and health product manufacturers, daily chemicals and food companies have begun to replace or try to add probiotic products produced by the company to their products; the C-side mainly uses a dealer model, and adopts differentiated marketing strategies through different channels such as online, offline, mother and child, beauty, and clinical nutrition.
A leading enterprise in the industry, with outstanding core R&D and customer advantages. As a leading enterprise in the domestic probiotic industry, the company has a number of related patents and has built the largest lactic acid bacteria strain resource bank in Asia, and has accumulated detailed data support for core strains and many clinical trials with many of the top three hospitals in China. Relying on strong R&D advantages, the company has established long-term and stable strategic partnerships with leading enterprises in the downstream industry by providing customers or jointly developing comprehensive solutions such as product formulations, corresponding process technology, product supply, and stability testing services for products already on the market.
Investment advice: The company is in a painful period of business transformation. The compounding business is under pressure, but the edible probiotics business continues to grow rapidly. The company has the core technical advantages of probiotics, and has accumulated a number of high-quality and stable B-side customers to form a good demonstration effect. The C-side actively lays out channels and is expected to contribute more in the future. At the same time, it plans to implement an equity incentive plan and cohesion, which is conducive to promoting the company's high-quality development. The company's revenue for 2023-2025 is estimated to be 3.66, 4.74, and 625 million yuan, respectively, and EPS is 0.41, 0.56, and 0.74 yuan, respectively. The corresponding valuations are 41, 30, and 23 times, respectively, maintaining a “buy” rating.
Risk warning: Increased industry competition, regulatory policy risks, compound business improvements falling short of expectations, probiotic customer development progress falling short of expectations, food safety risks.
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