Incident: The company announced the 2023 Restricted Stock Incentive Plan (draft) to grant 2.24 million restricted shares to a total of 78 executives, middle management, core employees, etc., accounting for about 2% of the total share capital, and the grant price was 13.1 yuan/share; of these, 1.904 million restricted shares were granted for the first time, and the performance evaluation target was: Using 2023 as the base period, 24-26 revenue or net profit to the mother will increase 25%/56.25%/95.31%, respectively, from the base period; if the company were to give incentives for the first time in early January 2024 If the target grants rights, amortization expenses of 1182/696/338/48,000 yuan will be incurred in 24-27 years, respectively, for a total of 22.64 million yuan.

The advantage of customer resources is outstanding, and Q4 performance is expected to recover steadily

The company cooperated with core customer resources such as Decathlon, Ikea, and Wanger. TOP5 customers account for about 90% of revenue, and there is still room for improvement in the core customer supplier system. As overseas sports and household goods retailers start to replenish stocks one after another, Q3's revenue decline narrowed, and Q4 is expected to continue the repair trend. In addition, many of the company's new customers are in a phase of volumetric growth and are expected to continue to contribute more.

Capacity expansion+adjustment, expansion of categories to drive growth

The company currently has three production bases in Xiamen, Shishi and Malaysia, and adjusts fund-raising projects in a timely manner based on improved production management capabilities and customer requirements to improve production efficiency.

1) The company prioritized the construction of the Malaysian base, which is now officially put into operation and shipment, with a planned production capacity of about 500 million yuan; 2) In August, the first hardware process production line at the Shishi base began production and delivery, with a planned production capacity of about 1 billion yuan;

3) In order to further improve the efficiency of capital use and operating efficiency, the fund-raising project “Tongda 6 #厂房（智能制造生产基地建设项目）” was terminated.

Adjust profit forecasts to maintain a “buy” rating

The company has now formed a “dual process (rubber and plastic+hardware)” and “three tracks (sports outdoor, home life and health care)” development pattern, with stable customer advantages and orderly expansion of production capacity; this stock incentive is expected to stimulate the motivation of the management team and improve operating efficiency. Due to the impact of overseas customer transfers on orders in 2023, we adjusted our previous profit forecast. It is estimated that the company will achieve net profit of 1.1/1.4/180 million yuan (previous value was 1.5/1.7/190 million yuan) in 23-25, respectively, and the corresponding PE is 24/19/15x, maintaining a “buy” rating.

Risk warning: macroeconomic and policy change risk; customer concentration risk; raw material price fluctuation risk; exchange rate risk; risk that the fund-raising project will not achieve the expected benefits, etc.