Incident Overview
The company announced the “Shenzhen Kangguan Technology Co., Ltd. 2024 Stock Option Incentive Plan (Draft)”, according to the announcement:
Shareholding size: The total number of stock options to be granted to incentive recipients in this incentive plan is 266.632.72 million shares. The underlying stock types involved are A-share common shares, which account for about 3.89% of the company's total share capital of 68,62187.76 million shares on the day the draft incentive plan was announced.
Transfer price: The exercise price of the stock options granted under this incentive plan is 26.52 yuan/share. That is, after meeting the exercise conditions, each share of the stock option granted to the incentive recipient can purchase 1 share of the company's shares at a price of 26.52 yuan.
Number of employees covered: The total number of incentive recipients granted by this incentive plan is no more than 2,154 people.
Effective Entitlement Date: The waiting period for stock options granted under this incentive plan is 12 months, 24 months, and 36 months, respectively, from the date the grant registration is completed. Incentive recipients of this incentive plan can only start exercising their rights after the expiration of the period.
Stock option costs: Assuming that the company grants incentive stock options at the end of April 2024, the impact of stock options granted under this incentive plan on the accounting costs for each period 2024-2027 is 2079.5, 2148.36, 1069.16, and 2.5743 million yuan.
Analytical judgment:
An incentive plan has been launched for 3 consecutive years, and the long-term incentive mechanism shows the company's operating confidence.
The company has launched an equity incentive plan for 3 consecutive years since 2022. According to the company announcement, the current employee stock ownership plan assessment year is the three fiscal years 2024-2026, and the target values for the 2024, 2025, and 2026 operating income assessments are 151, 174, and 18.8 billion yuan, respectively, corresponding increases of about 30%, 50%, and 62% over 2022, respectively. The trigger values are 144, 163, and 17.5 billion yuan respectively, up 24%, 41% from 2022, including 2024 and 2025 The target value is basically the same as the trigger value and the target value and trigger value of the previous 2023 incentive plan assessment.
Using revenue as the assessment goal, we help the company complete the in-depth expansion and business layout of the intelligent display industry chain. According to the company's announcement, the company's current equity incentive and 2023 incentive plan all use “operating income” as a company-level performance assessment index, which helps to consolidate the cornerstone of the company's performance, further improve the deep extension and business layout of the intelligent display industry chain, and continuously promote market space and product innovation and upgrading. According to the 23 annual report, the company will continue to strive to maintain the steady growth of its main business, increase the promotion of intelligent interactive products, and promote the rapid development of innovative display products. While serving customers, the company has successively launched its own brand KTC's MINILED and OLED e-sports displays, mobile wireless screens, Hao Li live streaming all-in-one devices, FPD smart beauty mirrors, etc., to increase the development of its own brand.
The company's smart TV business has performed steadily in 23 years, and the innovative display business has actively expanded. According to Lotu Technology's 2023 annual report on the global TV ODM market, KTC (Kang Guan) shipped nearly 8 million units throughout the year, reaching the top five in the ranking of professional foundries, with a year-on-year increase of 13.9%. In December at the end of '23, it took a dark horse to reap the monthly sales volume of 1.2 million units and won the December shipping volume championship. In terms of e-sports displays, according to Lotu Technology's news related to the online sales volume of e-sports monitors in mainland China in December '23, KTC ranked fourth in monthly online sales of e-sports monitors, with a year-on-year increase of 200%. KTC's growth rate continued to be high in '23, and the year-on-year increase in recent months has been over 100%.
Investment advice
The company focuses on smart display products. Over the past 22 years, it has launched its own brands to explore the market for new display products. The product structure continues to be optimized, and sales of its own brands are gradually expanding. In the future, it is optimistic that new display products will continue to contribute to the company and further improve profitability.
Based on the company's business situation, we adjusted the annual profit forecast. We expect the company's revenue for 23-25 to be 117/145/16.6 billion yuan (previous value was 130/155/18.8 billion yuan), +1.0%/+24%/+14% year over year, respectively, and the net profit to mother for 2023-25 is 12/15/18 billion yuan (previous value was 14.0/16.3/1.99 billion yuan), respectively, -20%/+23%/+20% year on year. The corresponding EPS is 1.76/2.17/2.61 yuan respectively (The previous value was 2.06/2.40/2.93 yuan). Based on the closing price of 25.64 yuan on April 8, '24, the corresponding PE was 15/12/10 times, respectively, maintaining the “gain” rating.
Risk warning
Downstream demand falls short of expectations, industry competition intensifies, order acquisition falls short of expectations, risks such as fluctuations in upstream raw material costs, etc., the risk of untimely delivery of goods due to rising sea freight charges and port blockages, the risk of new technology iteration risks, deviations in industry space estimation, the risk of third party data distortion, and the risk that public data used in research reports may be delayed or not updated in a timely manner.