Incidents:
The company released the draft 2018 stock option incentive plan: it is proposed to grant 16.25 million shares of equity to 185 incentive recipients (directors, executives, core personnel, etc.), accounting for 2.61% of the company's share capital, and the exercise price is 5.98 yuan. The assessment requirements are that the revenue for 2019/2020/2021 is not less than 5.2 billion, 5.6 billion and 6 billion dollars. Based on the average return on net assets from 2015 to 2017, the three-year return on assets growth rate should not be less than 55%/60%/65%.
Key points of investment:
The incentive draft binds company management and key personnel, which is conducive to stimulating team enthusiasm.
This time, the company's incentive targets include company executives and middle managers and core business cadres. Among them, 11 company executives accounted for 15.63% of the total number of grants; 137 middle managers, plus 37 core executives, accounted for a total of 84.37% of the total number of grants. The incentive plan binds the interests of the management team and core sales technical talents to the company's development. On the one hand, it effectively stimulates enthusiasm and fully increases enterprise vitality, which is conducive to improving the company's efficiency and performance; on the other hand, it is also conducive to retaining and attracting outstanding talents, and has an advantageous position in talent recruitment.
The conditions for exercising power focus on the growth of shareholders' equity, and the conditions for achieving it are relatively relaxed.
The current stock option incentive draft divides the company's performance assessment requirements into operating income and return on net assets (weighted average net assets after deduction). We believe that the implementation conditions are relatively relaxed. Among them, at the revenue level, the compound revenue growth rate in 2019-2021 was 7.42%; the return on net assets was a three-year growth rate of no less than 55/ 60%/65%. The selection of net asset growth indicators reflects the importance the company attaches to increasing the level of shareholders' equity returns, and also shows confidence in improving the efficiency of using its own capital.
Maintain a “Recommended” rating.
We maintain our previous forecast. The company's 2018-2020 EPS is 0.40 yuan, 0.49 yuan and 0.60 yuan respectively, and PE is 15 times, 12 times and 10 times respectively. The valuation level is currently clearly underestimated. Considering the company's major formulation strategy, we are optimistic about the company's long-term development and maintain the “recommended” rating.
Risk warning: the API boom is declining; market sales are unfavorable; costs are growing faster than expected, etc.