YUNDA HOLDING(002120)：TO LAUNCH ESOP AND STOCK OPTION INCENTIVE PLAN; WATCH FOR OPPORTUNITIES WITH UPSIDE SURPRISES

　　What's new
　　Yunda Holding announced that it proposes launching employee stock ownership (ESOP) and stock option incentive plans pending shareholder approval.
　　Stock option incentive: Yunda plans to launch a stock option incentive plan this year, proposing granting no more than 35.57mn shares (around 1.23% of the total share capital) to 361 employees, including directors, senior executives, middle management, and core business people. The stock options will be granted at an exercise price of Rmb9.73/sh (exceeding the July 11 close of Rmb9.61) and unlock in two phases (50% each) after 20 months.
　　ESOP: The firm plans to transfer the 7mn shares that it had previously repurchased to an ESOP at Rmb6.30/sh. The ESOP will be for no more than 65 staff, including directors, supervisors, and senior and middle managers, implying a total capital of Rmb44.1mn. The shares will unlock in two phases (50for each) after 20 months.
　　Both plans have the same performance assessment targets. For　Phase I, attributable net profit must be no less than Rmb3.5bn in 2024, or the parcel volume must grow no less than the 2024 industry average vs. 2023. For Phase II, attributable net profit must be at least Rmb3.65bn in 2025 or the parcel volume increase at a rate no lower than the 2025 industry average vs. 2023. We believe both plans will help align the interests of employees and provide attractive incentives.
　　Comments
　　Suggest watching investment opportunities offering upside　surprises. We expect delivery volume to maintain double-digit growth in 2023, believing that prices will edge downward to a manageable range. Yunda saw its operating　costs (excl. last-mile delivery costs) rise Rmb0.17 per parcel in 2022 due to a low capacity utilization ratio that was significantly less than the usual rate, which was higher than usual, thus weighing on the profit per parcel.
　　We think that Yunda will see its EPS rebound if it continues optimizing business operations. The firm’s valuation and market cap are now at low levels. We suggest watching the investment opportunities with upside surprises.
　　Financials and valuation
　　As the preannounced parcel volume growth in April and May missed expectations, we lower our 2023 earnings forecast 9% to Rmb2.54bn, but keep our 2024 earnings forecast unchanged at Rmb3.51bn. The stock is trading at 11.0x 2023e and 8.0x 2024e P/E. We maintain OUTPERFORM, but given the downward valuation of the express delivery sector, we cut our target price 16% to Rmb14 (implying 16x 2023e and 12x 2024e P/E), offering 46% upside.
　　Risks
　　Intensifying competition; sharp rise in labor and fuel costs.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。