Incident: Gree Electric announced the third phase of its employee stock ownership plan. The stock size is no more than 79.462 million shares, accounting for 1.4% of the total share capital. The total number of employees to participate is no more than 0.012 million, the purchase price is 20.31 yuan/share, and the capital size is no more than 1.614 billion yuan. We believe that the company's shareholding plan covers a wide range of areas and will effectively bind the interests of core employees and listed companies, stimulate employees' enthusiasm and creativity, and improve the long-term incentive mechanism.
The shareholding plan covers a wide range: the total number of participants to participate in Gree's third phase of the employee shareholding plan is no more than 0.012 million, covering 16.5% of the company's employees (based on the number of employees published in the 2023 annual report). The maximum subscription rate for company directors and supervisors is 30%; the total proposed subscription rate for company management cadres, technical experts, business executives and other personnel is 70%. The company has introduced two employee stock ownership plans. By introducing the third phase of the employee stock ownership plan, it is expected that the interests of a wider range of employees will be tied to the company's performance, and the company will achieve sustainable and high-quality development.
Clarify the ROE assessment requirements: The company-level performance assessment index for this employee stock ownership plan is that the return on net assets for the 2024 and 2025 assessment periods is not less than 20.0%. If the company's performance assessment does not meet the standards during the first assessment period, all unattributable stocks are deferred to the second assessment period. If the company completes the performance assessment indicators during the second assessment period, and the two-year average return on net assets calculation value is not less than 20.0%, it is still possible to allocate equity for the two periods; in addition, the current employee continuity plan also sets personal performance assessment levels. nucleus Metrics. We believe that the current employee stock ownership plan clarifies ROE assessment indicators and is expected to establish a benefit-sharing and risk-sharing mechanism for management, core employees, and listed companies, so that employees can pay long-term attention to the company's development to achieve better incentive results.
Investment advice: Gree's employee stock ownership plan is expected to establish a long-term incentive mechanism, leading to improvements in the governance structure and operating efficiency. Gree continues to build a new retail system and establish a stable online and offline business layout. It is expected that operating efficiency and terminal retail capabilities will continue to improve, and governance and management strategies will continue to be optimized and improved. After considering the amortization of the expenses of this employee stock ownership plan, we expect the company's EPS from 2024 to 2026 to be 5.48/5.97/6.53 yuan respectively, maintaining the buy-A investment rating, giving the company a PE valuation of 10x in 2024, which is equivalent to a target price of 54.82 yuan for 6 months.
Risk warning: There is a risk that the price of raw materials will rise sharply, the real estate market will decline sharply, and the foreign trade environment will deteriorate.