The company's recent situation

The company issued the “2024 Restricted Stock Incentive Plan (Draft)” announcement. The incentive plan is to grant 6.555 million restricted shares, accounting for 1.58% of the company's total share capital of 416 million yuan. The grant price is 26.15 yuan/share. It is intended to grant incentives to 325 people, accounting for 11.33% of the total number of employees at the end of 2023, mainly including directors, senior management, core technical personnel and key business personnel.

The company also issued the “2024 Employee Stock Ownership Plan (Draft)” announcement. The current shareholding scale is no more than 1.45,000 shares, accounting for 0.35% of the company's total share capital of 416 million yuan. The transfer price is 26.15 yuan/share, and the total number of employees participating in this shareholding plan is no more than 35, including 7 directors (excluding independent directors), senior management, and supervisors.

reviews

The incentive plan has been implemented to continuously enhance business cohesion. According to the announcement, the two incentive plans involved a total of 360 people, accounting for 12.6% of the company's total number of employees at the end of 2023. The main incentive targets include company directors, executives, and core technical or business personnel. The assessment years for this incentive plan are all three fiscal years 2024-2025, and are assessed once per fiscal year. Based on the company's 2023 operating income unrelated to public health emergencies (RMB 2,709 billion), it corresponds to the target revenue growth rate of 20% combined in 2024-2026 (compound growth rate with a trigger value of 15% for incentive unlocking). We believe that the company's announcement of an incentive plan is expected to consolidate talent advantages in an increasingly competitive environment, guarantee talent support for business development, and enhance business cohesion and efficiency output.

Spatio-temporal omics and nanopore sequencing products were introduced to further enhance the momentum of the production line. The company issued an announcement. 1) Huada Technology Holdings and Huada Life Science Research Institute signed an agreement to introduce intellectual property rights for products related to spatio-temporal machines, microscopes, and spatio-temporal visualization reagent kits. The company calculated license fees based on 6% of the revenue (excluding tax) of sales of authorized spatiotemporal products after quarterly accounting; 2) signed an agreement with Huada Xufeng Technology to obtain global market distribution rights for spatio-temporal reagent consumables such as spatiomics kits and chips; 3) The company obtained nanopore sequencer equipment and reagent consumables related to reagent consumables such as nanopore sequencer equipment and reagent products Distribution rights for global markets. We believe that by introducing spatio-temporal and nanopore sequencing-related products, the company is expected to further enrich the production line and inject momentum into subsequent long-term development.

Profit forecasting and valuation

We maintain the company's loss forecast of $216 million for 2024 and profit forecast of $16.08 million for 2025.

Maintaining a target price of 81.7 yuan (based on the DCF model), there is 54.7% upside compared to the closing price, maintaining an outperforming industry rating.

risks

Demand for downstream applications fell short of expectations, commercialization fell short of expectations due to geopolitical friction, and industry competition intensified.