Event: The company released a draft 2024 stock incentive plan to grant 7.05 million restricted shares, accounting for approximately 2.92% of the current total share capital. The award price is 4.73 yuan/share. The number of incentives to be awarded is 50 people, including company directors, executives, and core technical and management personnel.
Performance incentive target analysis: According to the company-level assessment requirements of the incentive plan: based on 2023 revenue and net profit deducted from mother, (1) the 2024 revenue growth rate shall not be less than 5% or the growth rate of not less than 260%; (2) the 2025 revenue growth rate shall not be less than 15% or the net growth rate of not less than 320% without deduction; (3) the 2026 revenue growth rate shall not be less than 25% or the net profit without deduction of 400%. According to the lower limit of the performance assessment index, we estimated that in order to unlock incentives, the company's revenue must reach 8.4/9.2/1.0 billion yuan from 2024 to 2026, corresponding to a year-on-year growth rate of 5%/10%/9%, or deducted non-net profit of 0.3/0.4/60 billion yuan during the same period, corresponding year-on-year growth rate of 260%/38%/36%.
Cooperation with Yibao Technology has been implemented, focusing on AI innovative drug research and development: The company previously announced that it signed a “Joint Venture Contract” with Beijing Yibao Technology. The two sides will focus on cooperation in R&D, industrialization, and commercialization of innovative drugs based on AI pharmaceutical technology. The registered capital of the joint venture is 120 million yuan, of which Qianyuan invested 72 million yuan and held 60% of the shares. Yibao Technology is a drug developer based on artificial intelligence. It analyzes, predicts, and screens drug candidates for different compounds in developed drugs based on its spirin drug development system. In cooperation, Qianyuan could potentially select 2 pipelines in the research pipeline for subsequent industrial development and promotion of Yibao. This cooperation is expected to drive Qianyuan's strategic transformation from generic drugs to innovative drugs. At present, the joint venture has completed industrial and commercial registration and obtained a business license.
Continued growth of Varenicline helped the company's performance continue to improve: According to the company's annual report data, the company's sales of other pharmaceuticals increased from 119 million yuan in 2022 to 136 million yuan in 2023, an increase of 13.6% over the previous year, which is mainly expected to be driven by new sales of Vareniclan. Currently, the company's other main varieties, such as tromethotriol, vitamin AD drops, and tamsulosin, are all uncollected varieties or varieties collected before the eighth batch. It is expected that the short-term collection policy will not impact the company's current variety sales pattern, and after the company ends previous cooperation agreements with investors such as the Lize Fund, improvements in financial expenses will significantly increase the company's profit level.
Profit forecast and rating: This equity incentive plan shows management's confidence in the company's subsequent development. On the basis of maintaining the company's profit forecast from 2024 to 2025, we added a profit forecast for 2026. We expect the company to achieve revenue of 9.5/11.5/1.33 billion yuan from 2024 to 2026, corresponding to a year-on-year growth rate of 19.3%/20.7%/15.4%, achieving net profit of 0.7/145/180 million yuan, corresponding to the current PE The valuation was 34/15/12x, respectively, maintaining a “buy” rating.
Risk warning: risk of price reduction in collection, risk of falling short of expectations of vareniclan release, risk of impairment of goodwill.