occurrences

The company released the 2024 Restricted Stock Incentive Plan (draft).

Key points of investment

The goal of the equity incentive plan: The compound growth rate of net profit for 2024-2026 is over 50%, demonstrating confidence in development. According to the announcement, the equity incentive plan is to grant 2.8 million shares (2.38 million shares for the first time, 420,000 shares reserved). For the first time, it targets a total of 114 people, including executives, middle management, and core executives, including the company's general manager. The initial grant price of restricted shares was 11.25 yuan/share, and the performance targets for unlocking were:

(1) The first unlocking period: 2023 net profit (102 million yuan) is the base, and the 2024 net profit growth rate is not less than 50% (or 153 million yuan); (2) The second unlocking period: based on 2023 net profit, the cumulative net profit growth rate for 2024-2025 is not less than 275% (that is, 2025 net profit is not less than 230 million yuan, up 50% year on year); (3) The third unlocking period: based on 2023 net profit, the cumulative net profit growth rate for 2024-2026 is not less than 612.5% (that is, 2026 net profit of not less than 340 million yuan, a year-on-year increase of 50%). Assuming that the company first grants restricted shares in early May 2024, the equity payment fees for 2024-2027 are: 0.12, 0.11, 0.04, and 0.1 billion yuan, respectively.

The invisible champion of mining belt transportation equipment. Increased share, overseas expansion, and product upgrades are expected to accelerate performance. The company is a supplier of material conveying system solutions in China. Its main products are various belt conveyors, which are mainly used in mining and other fields. The company thoroughly developed the world's top 40 mining companies, had in-depth contacts with Vale, Qingshan Industrial, Delong Steel, Indonesia's Cotai Group, etc., and successfully won the bid for the world's largest iron ore project, Simandou Iron Ore.

Large industries and small companies will continue to increase their market share

(1) We estimate that the domestic belt conveyor market is expected to grow to more than 30 billion yuan in 2027.

(2) The concentration of the industry is scattered, and the average domestic market share of the company in 2018-2020 was 2.5%. (3) Financial strength and technical level are important competitive factors. The company's belt conveyors are in an advantageous position in China, and future industry concentration and the company's market share are expected to increase.

Overseas orders are expected to explode under the “Belt and Road” initiative

The company accounts for 10% and 20% of overseas revenue in 2022 and is expected to account for more than 60% of overseas revenue in 2024. At the same time, the company has sufficient orders in hand, with overseas orders accounting for more than 70%. Overseas business is expected to grow rapidly in the future.

Profit forecasting and valuation

We forecast that the company's net profit for 2024-2026 will be 160 million yuan, 260 million yuan, and 360 million yuan, respectively, up 58%, 59%, and 40% year-on-year, with a compound growth rate of 52%. The corresponding PE is 23, 14, and 10 times, respectively. Maintain an “Overweight” rating.

Risk warning

Domestic market share growth is less rapid than expected risk, overseas market development is not as fast as expected risk, and downstream customer demand for intelligent transportation machinery falls short of expected risk.