Xlinmen Furniture Co.Ltd(603008) (603008)
Event: the company disclosed the 2021 stock option incentive plan (Draft) and the 2021 employee stock ownership plan (Draft).
It has a wide incentive range and binds the core backbone of middle and high levels. The stock option incentive plan plans to grant 4 million stock options to 167 incentive objects, accounting for 1.03% of the total share capital of the company. The stock option grant plan covers a wide range of employees, and all of them are middle-level managers and core technology (business) backbone of the company, with a wide incentive range. The participation scope of the employee stock ownership plan includes 42 directors, supervisors, senior managers and core managers of the company, with a scale of no more than 6766600 shares, which fully binds the interests of the company and core management.
Set higher unlocking conditions to activate endogenous growth potential. The company’s performance assessment objectives for the stock option incentive plan and employee stock ownership plan are as follows: 1) based on the income in 2020, the growth rate of operating income from 2022 to 2024 will not be less than 66%, 108% and 160%, and the corresponding operating income will be RMB 9.335 billion, RMB 11.696 billion and RMB 14.621 billion respectively; 2) Based on the income in 2020, the growth rate of net profit attributable to the parent company from 2022 to 2024 shall not be less than 128%, 195% and 285%, and the corresponding net profit attributable to the parent company shall be 715 million yuan, 925 million yuan and 1207 million yuan respectively. Based on the profit forecast of 2021 (the operating revenue is 7.132 billion yuan and the net profit attributable to the parent company is 516 million yuan) according to the calculation, the assessment objectives of the company’s operating revenue and net profit attributable to the parent company correspond to the compound growth rate of 27% and 32.7% from 2021 to 2024, respectively. The increase in the proportion of independent brands is expected to drive the net interest rate upward. This incentive scheme sets higher assessment objectives, which is expected to play a positive role in activating the endogenous growth vitality of the company.
Under the policy of furniture going to the countryside, we are optimistic that the company will achieve performance appraisal. The unit price of mattress category is relatively low, the transportation is convenient, and the requirements for installation services are low, which is in high compliance with the policy of “furniture to the countryside”. At the same time, the company has actively carried out channel sinking since 2019 and laid out the “Ximian” distribution channel. By the end of 2021h1, the company has 898 “Ximian” distribution stores and established outstanding brand strength in the sinking market.
The amount of incentive amortization cost is small and has a low impact on the company’s performance. The company estimates that the total amortization cost of stock options is 10.9777 million yuan, including 5.966 million yuan, 3.4014 million yuan and 1.6103 million yuan from 2022 to 2024, accounting for 0.83%, 0.37% and 0.13% of the target net profit attributable to the parent company in that year, which has little impact on the company’s performance.
Profit forecast and investment rating: the performance of independent brands is bright, the channel expansion is accelerated, and the policy of “furniture to the countryside” is superimposed, The company’s net profit attributable to the parent company from 2021 to 2023 was raised to RMB 520 million, 720 million and 930 million (previously predicted to be RMB 520 million, 640 million and 760 million), corresponding to pe23, 17 and 13X. The development momentum of independent brands was strong. Option incentive and employee stock ownership demonstrated the development confidence of the management, and the rating was raised from “overweight” to “buy”.
Risk warning: price fluctuation of raw materials; Industry competition intensifies, channels sink less than we expected, RMB exchange rate fluctuates, etc.
