Jiuyang Equity Incentives Stepping on Soymilk Machine Industry Gross Profit Margin Continues to Lower

In less than six months since its introduction, Jiu Yang’s equity incentive plan has come to an end. In the announcement of cancellation of the incentive plan, Jiuyang stated that since the disclosure of the equity incentive draft, the internal implementation environment and the external macro situation have undergone major changes.

Last Saturday, Jiuyang announced the cancellation of the 2011 Restricted Stock Incentive Plan. In less than half a year since its introduction, Jiuyang’s equity incentive plan has suddenly ended.

In 2008, a sudden "toxic milk powder" incident caused the rapid rise of Jiuyang. This year, 9 Yang Soymilk production and sales exceeded 10 million units in one fell swoop, occupying 86% of the market share. But explosive success and a monopoly profit of up to 30% soon attracted competitors.

This week's analysis of Northeast Securities said that the soybean milk machine industry's future gross margin level will continue to decline. A securities analyst who is familiar with the home appliance market believes that in the announcement of cancellation of the incentive plan, Nine Yang stated the truth.

According to Jiu Yang, “Since the disclosure of the equity incentive plan, the internal implementation environment and the external macro situation have undergone major changes. First, the range of equity incentive targets does not cover the newly introduced complex management, technology, and sales of the company. Secondly, the deposit reserve ratio and interest rate have been raised several times, resulting in a significant increase in the cost of purchasing restricted stocks, which has brought difficulties to the implementation of the company’s 2011 restricted stock incentive plan.For the above reasons, the company believes that the implementation of the plan continues. It will be possible to harm its interests."

“This equity incentive is almost the same as sending in the blank, something that does not need to be hard work, and other employees are naturally not convinced. This is an internal reason. On the other hand, the increase in the deposit reserve ratio and interest rate has resulted in a substantial increase in the cost of buying stocks. The increase, especially the interest rate on private loans, has made it difficult for executives to raise funds. This is an external reason,” said a securities analyst.

However, the reporter calculated that according to the exercise price of 7.59, an average of only 130,000 yuan per senior executive would be enough. This figure should not be used by the Jiuyang senior management team to use private loans to purchase equity.

"So, the last word of the announcement is the key, and that is to continue to implement the plan will damage the interests of the company." The analyst said, "In 2007, Yili because of equity incentives led to the company's losses, a lesson ah."