Dongguan Securities: Gave Mindray Medical a buy rating

2022-01-20Wei Hongmei and Tan Xinxin of Dongguan Securities Co., Ltd. conducted a study on Mindray Medical and released a research report "2022 Employee Stock Ownership Plan Review: Firm Long-term Development Belief", which gives Mindray Medical a buy rating in this report, and the current stock price is 354.94 yuan.

Mindray Medical (300760)

Event: Recently, the company released the 2022 employee stock ownership plan (draft). The ESOP was repurchased at a price of RMB50 per share by the transferee Company, and the total amount of funds did not exceed RMB152.4331 million.

Comments:

The Company will use the repurchased shares for an employee stock ownership plan. According to the draft ESOP, the source of shares in the ESOP is the A-share common shares of Mindray Medical that have been repurchased by the Company in the special account for repurchase, with a total of not more than 3,048,662 shares, accounting for approximately 0.2508% of the total share capital of the Company of 1,215,691,266 shares. At the same time, the participation object of the employee stock ownership plan is the core employees and technical backbone of the company, and the total number of employees participating in the plan shall not exceed 2,700. After the implementation of the ESOP, the total number of shares held by all valid ESOP shall not exceed 10% of the total share capital of the Company.

The company announced its employee stock ownership plan in early 2022, demonstrating its confidence in long-term development. The company intends to implement an employee stock ownership plan for core employees and technical backbones, which is conducive to the long-term development of the company. On the one hand, a reasonable incentive mechanism can highlight the company's emphasis on outstanding talents, which is conducive to improving the cohesion of employees, mobilizing the enthusiasm and creativity of employees, and enhancing the sense of responsibility and mission of the company's management team and the company's core backbone for the company's growth and development. On the other hand, the establishment and improvement of the benefit sharing mechanism of employees and shareholders is conducive to improving the level of corporate governance, improving the company's core competitiveness, promoting the sustained and stable and rapid development of the company's overall operation, and achieving the purpose of safeguarding the interests of shareholders.

The unlocking conditions of the employee stock ownership plan are relatively relaxed, with an annual growth rate of about 20%. The draft employee stock ownership plan proposes that the incentive is unlocked in three batches, and the first/second/third batch of unlocking conditions are: compared with 2021, the growth rate of net profit attributable to the mother in 2022/2023/2024 is not less than 20%/44%/73%. Overall, the average annual compound growth rate of 20% attributable net profit is relatively low compared with the company's growth in recent years (2018/2019/2020 attributable net profit growth rate is 44%/26%/42%, respectively). According to the company's announcement, on the basis of legal compliance and the company's existing cash compensation system, the company needs to further establish and improve the long-term incentive mechanism. Therefore, the company believes that the realization of the incentive for the participants of the employee stock ownership plan at a lower incentive cost can truly enhance the enthusiasm of the participants, effectively unify the interests of the participants and the company and the company's shareholders, and thus promote the realization of the company's overall goals.

Investment advice: The company is a domestic medical device leader, innovation and brand power go hand in hand, product diversification, future growth can be expected. We expect the company's earnings per share in 2021/2022 to be 6.74/8.30 yuan, respectively, and the current share price corresponds to 50/40 times PE, respectively, maintaining the company's "recommended" rating.

Risk Warning: Risk of industry policy changes; risk of impact of the new coronavirus pneumonia epidemic; risk of exchange rate fluctuation; risk of operation and management; risk of product research and development; risk of Sino-US trade friction, etc.

A total of 22 institutions have given ratings in the last 90 days, with 18 buy ratings and 4 overweight ratings; the average target price of institutions in the past 90 days has been 472.45; the Securities Star Valuation Analysis Tool shows that Mindray Medical (300760) has a good company rating of 4.5 stars, a good price rating of 2.5 stars, and a valuation comprehensive rating of 3.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)