Nari Technology Co.Ltd(600406) (600406)
Event: on December 8, 2021, Nari Technology Co.Ltd(600406) issued the restricted stock incentive plan (Draft) for 2021. It is proposed to grant no more than 39981400 shares of restricted stock (accounting for 0.72% of the total share capital). The first grant price is RMB 21.04/share, and the grant objects are 1300 directors, senior executives and core backbone of the company.
The shares are unlocked in four phases (2022-2025), the unlocking conditions assess roe, deduction of non parent net profit, R & D expenses and economic added value. In 2018, the company issued the first phase of equity incentive plan, with the grant price of RMB 9.08/share and the grant quantity of 39.7 million shares. The unlocking conditions are linked to deduction of non parent net profit, roe and economic added value. The current incentive scheme continues the idea of the first incentive in terms of unlocking conditions , in four unlocking periods: 1) roe is not less than 14% and not less than the 75th percentile value of the benchmarking company; 2) R & D expenses & net profit deducted from non parent company shall not be less than 5% / 10% respectively compared with CAGR in 2020, and the net profit deducted from non parent company shall not be less than 5 times of the average net profit deducted from non parent company of 18 enterprises such as Tbea Co.Ltd(600089) and Dongfang Electric Corporation Limited(600875) (if the comparability becomes weak due to large fluctuation of annual performance of the target company, the board of directors can remove and replace samples according to authorization of the general meeting of shareholders); 3) economic value added Δ EVA shall be greater than 0. 4) The unlocking proportion of restricted shares of incentive objects shall be determined according to individual performance appraisal. According to the calculation of the closing price of 42.93 yuan / share on the day when the draft is published, the company will apportion equity incentive expenses of 205 / 2.05/2.05/1.33/0.79/0.36 billion yuan from 2022 to 2027 respectively.
Under the background of double carbon, the new power system is expected to bring structural opportunities, and the directions of UHV, intelligent distribution network and digitization are expected to benefit. In terms of total investment, we expect the total investment of the State Grid to increase steadily during the 14th Five Year Plan period, but against the background of a large proportion of new energy access, changes in load structure, massive penetration of power electronic equipment and other problems, We believe that the power grid investment will focus on grid construction (such as UHVDC), intelligent distribution network (to deal with the access of distributed power generation and new loads), digitization (dispatching system, ICT), pumped storage, etc.
Nari Technology Co.Ltd(600406) is the core support unit of the new strategy of the State Grid. Although the company’s business composition is complex, it is expected to fully benefit from the structural changes of State Grid Investment: 1) information communication, UHV Core device (IGBT), dispatching software and other businesses will significantly benefit from the construction of new power system. We estimate that the compound growth rate of these sectors from 2021 to 2025 is in the range of 20% – 30%; 2) in terms of main business, distribution automation and smart meter in power grid automation sector are expected to benefit from the structural adjustment of power grid investment, and the growth rate range is relatively “13th five year plan” Improved; 3) The year-on-year growth rate of off grid business 2021q1-3 is faster than that of on grid, mainly due to the high increase in the sales of new energy related secondary equipment and power electronic equipment such as SVG, and the high boom is expected to be maintained.
Profit forecast and investment rating: Based on the firm leading position of the company’s power secondary equipment, we maintain the forecast of the company’s net profit attributable to the parent company in 2021-23 to be 5.87 billion yuan, 6.94 billion yuan and 8.17 billion yuan respectively, with a year-on-year increase of + 21.0%, + 18.2% and + 17.6% respectively. The corresponding current price PE is 41x, 34x and 29x respectively, and the target price is 50.08 yuan, corresponding to 40xpe in 2022, maintaining the “buy” rating.
Risk tip: the power grid investment is less than expected, the macro-economy is down, and the competition is intensified.
