\u3000\u30 Shenzhen Zhenye(Group)Co.Ltd(000006) 51 Gree Electric Appliances Inc.Of Zhuhai(000651) )
Event:
Gree Electric Appliances Inc.Of Zhuhai(000651) issued an announcement to adjust the performance evaluation indicators of the first phase of the employee stock ownership plan. At the same time, the company announced that it plans to launch the second phase of employee stock ownership plan.
Comments:
Phase I employee stock ownership plan: adjust performance assessment objectives and bind the interests of core employees. In June of 21, the company launched the first phase of employee stock ownership plan. The scale of shares to be used for incentive is no more than 108 million shares. The actual purchase quantity is about 46.33 million shares, and the purchase price is 24.68 yuan / share. Since the second half of the year, China’s real estate sales have declined significantly and the epidemic has repeatedly impacted residents’ purchase intention. The company plans to adjust the performance evaluation indicators. The main differences are as follows: 1) before the adjustment, the net profit in 2021 / 2022 will increase by no less than 10% and 20% respectively compared with that in 2020, or the total net profit in 2021 / 2022 will not be less than 230% of the net profit in 2020 (if the first phase is not up to the standard); 2) After adjustment: the net profit in 2021 / 2022 will increase by no less than 1 billion yuan and 2 billion yuan respectively compared with that in 2020, or the total net profit in two years will increase by no less than 3 billion yuan compared with that in 2020 (if the first phase is not up to standard), and the return on net assets of the company in 2022 will not be less than 22%. According to the adjusted plan, the bottom line of the assessed net profit (including share based payment expenses) in 2021 and 2022 is RMB 23.18/24.18 billion respectively, down from RMB 24.40/26.62 billion before the adjustment. However, considering that this adjustment further binds the interests of core executives and fully mobilizes the enthusiasm of middle-level cadres, it is of great strategic significance for long-term operation. In addition, in 2021, the actual assessment net profit of 23.09 billion yuan (net profit attributable to the parent company of 23.06 billion yuan + share based payment expenses of 31 million yuan) is slightly lower than the target. Based on the total conversion of two years, the assessment net profit in 2022 should be ≥ 24.27 billion yuan (including share based payment expenses). Phase II employee stock ownership plan: the incentive effect will be more direct and obvious. (1) Core content: the company plans to grant 94.73 million repurchased shares (accounting for 1.6% of the current total share capital) to 12000 middle-level cadres and core employees at 16.36 yuan / share. The employee stock ownership plan is assessed in two phases, of which the net profit (including amortization expenses) in 2022 / 2023 will increase by no less than 2 / 3 billion yuan (24.18/25.18 billion yuan) compared with 2020 (if the first phase fails to meet the standard, the total increase in two years can also be no less than 5 billion yuan), The roe in 2022 / 2023 shall not be less than 22% / 21%, the annual cash dividend rate shall not be less than 50% or the cash dividend shall not be less than 2 yuan / share. (2) Calculation of the bottom line of net profit attributable to the parent company: assuming that the plans for phase I and phase II are up to standard, the net profit in 2022 / 2023 can reach 24.27/25.18 billion yuan. Combined with the share payment expenses of the two plans in 2022 / 2023 of 394 / 127 million yuan and 581 / 775 million yuan (if the second phase is 100% subscribed), the bottom line of net profit attributable to the parent company in 2022 / 2023 can be calculated as 23.295/24.278 billion yuan. (3) The incentive effect of the second phase of the stock ownership plan is more obvious: compared with the first phase of the plan, the chairman of the second phase of the plan did not participate and distributed all the shares to the core backbone; The second phase of the plan allows the holders to have the right to dispose of their own shares one year after the transfer of shares to their personal account, and does not set up a “retirement clause” as in the first phase.
Earnings forecast, valuation and rating: continue to implement employee stock ownership and improve corporate governance. The dividend yield implies that the current valuation is at the bottom and maintains the “buy” rating Gree Electric Appliances Inc.Of Zhuhai(000651) continue to implement share repurchase and employee incentive plan to further improve corporate governance and benefit sharing. Considering the great uncertainty of economic growth and bulk price, the net profit attributable to the parent company in 202224 was reduced by 23.9/267/30.4 billion yuan (9% / 8% / 6% lower than the previous forecast), the current price corresponding to PE was 8, 7 and 6 times, the “buy” rating was maintained, and the target price was 46.62 yuan. From the dividend rate, the current market value of Gree is in the bottom range. Define the average dividend rate = (cash dividend + repurchase cancellation) / average market value. Assuming that the average market value in 2022 = 19.5 billion yuan (data on May 20), the cash dividend rate is 50%. The first and third repurchase cancellation parts (13.9 billion yuan) are completed in 2022. Gree’s expected average dividend rate in 2022 has reached 13.2%, which is the highest level since 2012.
Risk tip: the real estate industry has been depressed for a long time, and the price of raw materials has increased significantly.
