Xinyichang's revenue fell for three consecutive years, shrinking traditional LED production capacity, and fell another 13.8% in the first quarter

As performance continues to decline, Xinyichang (688383.SH) launched a stock incentive plan.

On the evening of May 25, Xinyichang released the 2025 restricted stock incentive plan (draft). The grant price of the restricted stock in this incentive plan is 28.03 yuan per share, which is approximately 50% of the company's average stock trading price of 56.04 yuan per share on the trading day before the announcement of the incentive plan.

The incentive plan shows that in the first vesting period (2025), Xinyichang's operating income target value is a 15% increase compared with 2024; the trigger value is a 12% increase compared with 2024.

However, from 2022 to 2024, Xinyichang's operating income and net profit have declined for three consecutive years.

For performance in 2024, Xinyichang said that the company's board of directors proactively implemented an industrial upgrading strategy, focused on the development of new display and semiconductor technologies through forward-looking shrinking of traditional LED production capacity.

Entering 2025, Xinyichang encountered a disadvantage at the beginning. In the first quarter, the company achieved operating income of 227 million yuan, a year-on-year decrease of 13.78%; net profit was 11.6963 million yuan, a year-on-year decrease of 59.58%.

Therefore, Xinyichang's operating income in the first quarter of 2025 only completed 21.14% of the target value of the stock incentive plan and 21.7% of the trigger value.

Planned implementation of 2025 restricted stock incentive plan

Xinyichang is mainly engaged in the research and development, production and sales of intelligent manufacturing equipment for semiconductor, LED and new display, capacitor, lithium battery and other industries, providing customers with advanced and stable equipment and solutions to realize intelligent manufacturing.

After years of development and accumulation, Xinyichang has become a leading enterprise in the field of domestic semiconductor, new display packaging and capacitor aging test intelligent manufacturing equipment.

On the evening of May 25, the 2025 Restricted Stock Incentive Plan (Draft) released by Xinyichang showed that the company’s incentive plan plans to grant 1.064 million restricted shares to incentive targets, accounting for approximately 1.04% of the company’s total share capital at the time of the announcement of the draft incentive plan.

The announcement shows that the grant price of Xinyichang’s restricted shares under this incentive plan is 28.03 yuan per share, which is approximately 50% of the company’s average stock trading price of 56.04 yuan per share on the trading day before the announcement of this incentive plan.

The incentive targets of Xinyichang's stock incentive plan are director and board secretary Liu Xiaohuan, employee representative director and core technical staff Liang Zhihong, financial director Wang Lihong, core technical staff Zhou Zan, and core technical staff Wang Teng.

At the same time, Xinyichang’s incentive targets also include a total of 184 people including the company’s middle managers, key employees and other personnel deemed by the board of directors to need incentives.

From this point of view, among the Xinyichang incentive targets, R&D technicians account for a large proportion, and they are highly targeted.

However, Xinyichang launched a 50% off stock incentive plan, which seems to be very motivating, but in fact the assessment is also quite difficult.

The incentive plan shows that in the first vesting period (2025), Xinyichang's operating income target value is a 15% increase compared with 2024; the trigger value is a 12% increase compared with 2024.

In the second vesting period (2026), Xinyichang's operating income target value is a 35% increase compared with 2024; the trigger value is a 28% increase compared with 2024.

In 2024, Xinyichang achieved operating income of 934 million yuan, a year-on-year decrease of 10.22%; net profit was 40.458 million yuan, a year-on-year decrease of 32.91%.

It is calculated from this that in 2025 and 2026, the target values of Xinyichang's operating income assessment are 1.074 billion yuan and 1.261 billion yuan respectively, and the trigger values are 1.046 billion yuan and 1.196 billion yuan respectively.

However, entering 2025, Xinyichang had a bad start. In the first quarter, the company achieved operating income of 227 million yuan, a year-on-year decrease of 13.78%; net profit was 11.6963 million yuan, a year-on-year decrease of 59.58%.

Therefore, Xinyichang's operating income in the first quarter of 2025 only completed 21.14% of the target value and 21.7% of the trigger value.

A financial officer from a listed company told a reporter from the Changjiang Business Daily that the assessment targets of the company's stock incentive plan are set too high and there are situations where the targets cannot be met, which will weaken the enthusiasm of employees and reduce team cohesion.

At the same time, the above-mentioned financial personnel suggested that when setting incentive targets, Xinyichang should conduct a comprehensive evaluation based on the three elements of industry average, historical performance, and strategic planning. If there is already a problem of too high goals, it can be remedied by introducing a dynamic adjustment mechanism and supplementing cash incentives.

Net revenue and profit have declined for three consecutive years

In fact, Xinyichang's performance decline has begun in 2022.

In 2021, Xinyichang achieved operating income of 1.197 billion yuan, a year-on-year increase of 69.90%; net profit was 232 million yuan, a year-on-year increase of 115.78%, both hitting record highs.

However, in 2022 and 2023, Xinyichang's operating income will be 1.184 billion yuan and 1.040 billion yuan respectively, a year-on-year decrease of 1.08% and 12.12% respectively; net profits will be 205 million yuan and 60.3038 million yuan respectively, a year-on-year decrease of 11.75% and 70.55% respectively.

Regarding the performance in 2023, Xinyichang said that due to the impact of macroeconomic environmental factors and technological iterations, the company's traditional LED die-bonding equipment operating income and gross profit margin have both declined, which is the main reason for the company's 2023 operating income and net profit decline.

Under this circumstance, Xinyichang also stated that despite facing a difficult external environment, the company will continue to increase investment in research and development and continue to enrich and optimize product categories and structures to maintain the company's industry leading edge.

Based on the performance in 2024, Xinyichang’s operating income and net profit have both declined for three consecutive years.

In the 2024 annual report, Xinyichang stated that during the reporting period, in the face of multiple external challenges, the company's board of directors proactively implemented an industrial upgrading strategy, focused on the development of new display and semiconductor technologies through forward-looking shrinking of traditional LED production capacity. Although short-term revenue has been affected, the core business fundamentals remain stable, the industry position and market share remain at the original high level, and the competitive advantage has not been substantially weakened.

Despite fluctuations in performance, Xinyichang's investment in R&D continues to grow.

From 2022 to 2024, Xinyichang’s R&D expenses will be 89.6444 million yuan, 96.5302 million yuan and 97.6192 million yuan respectively, representing year-on-year increases of 17.18%, 7.68% and 1.13% respectively.

At the same time, in 2024, the net cash flow generated by Xinyichang's operating activities was 139 million yuan, which was a significant improvement from the previous year. The company stated that this was mainly due to the increase in cash received from selling goods and providing services.

However, due to the continued decline in performance, some of Xinyichang's financial data are not good-looking.

As of the end of 2024, the book value of Xinyichang's accounts receivable was 546 million yuan, accounting for 19.30% of total assets.

Xinyichang said that in 2024, the company's accounts receivable will be large in amount, occupying more of the company's working capital, which may cause the company's liquidity shortage; if the credit of the accounts receivable object deteriorates or the business is poor, resulting in the inability to pay the payment, the company will face bad debt losses, which will have a negative impact on the company's operating results.

As of the end of 2024, the book value of Xinyichang's inventory was 760 million yuan, accounting for 39.54% of current assets, and the amount and proportion remained at a high level.

Xin Yichang introduced that the company's high end-of-period inventory balance level is related to the company's products, which are mainly intelligent manufacturing equipment and the acceptance policy of downstream customers. The company adopts a "production based on sales" production model. Equipment requires a long cycle from raw material procurement to production and processing, shipment to final acceptance to confirm revenue, so the inventory balances are relatively high.