Introduction to this report:
The company issued an employee stock ownership plan (draft) to meet the needs of sustainable development and continuous attraction and retention of outstanding talents, and enhance long-term development potential.
Key points of investment:
Profit expectations were raised and the “increase in holdings” rating was maintained. Considering the steady expansion of the company's production capacity, smooth product sales, and marginal relief of cost-side pressure, we raised our 2023-2025 profit forecast. The company's 2023-2025 EPS is expected to be 1.72/2.02/2.36 yuan (original value was 1.64/1.94/2.25 yuan). Referring to the industry valuation level, the company was given 13.0xPE in 2024, raised the target price to 26.5 yuan, and maintained the “gain” rating.
The shareholding plan deepens employee bonding and further enhances team cohesion. The total number of employees in the current employee stock ownership plan is no more than 257 (excluding reserved grantees), and the share size does not exceed 0.73% of the current total share capital of the company. The subscription share of directors, supervisors, and senior management of the company to participate shall not exceed 14.91%, and key employees and other personnel deemed by the board of directors to be motivated shall not exceed 69.57%, and the reserved share shall not exceed 15.52%. The share ownership plan repurchase price is 13.23 yuan/share.
Increase the dividend ratio and enhance shareholder returns. On March 4, the company announced the cash dividend plan for 2023 and 2024. It plans to distribute a cash dividend of not less than 8.50 yuan (tax included) to all shareholders for every 10 shares, with an estimated total dividend of 282 million yuan. We estimate the corresponding dividend rate of about 50%. The company plans to continue to implement return measures such as cash dividends within 2024 according to business conditions, implement a “long-term, stable and sustainable” shareholder value return mechanism, continuously enhance shareholder returns, and share development results with investors.
The quality & cost advantages are outstanding, and the logic of overseas expansion is clear. 1) The company's technology originates from Europe. After more than 20 years of digestion and absorption, it has formed an exclusive process formula to grasp the individual needs of downstream, and achieve high quality, efficient production and stable supply. 2) Entering into wood pulp trade, stabilizing upstream supply, reducing costs in large-scale procurement, and stable cooperation with core producers. 3) The Huatech series was successfully promoted overseas, widely recognized by customers, and continued to increase global share & brand influence.
Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.