Event: the company plans to use its own capital of RMB 150 million to acquire 15% of Shao Wuyong's high-tech stake held by Yongjing Technology. After the completion of the acquisition, the company will hold 75% stake in Yongtai High-tech, and Yongjing Technology will no longer hold Yongtai High-tech stake. In this regard, our comments are as follows:

Electrolyte lithium hexafluorophosphate, LiFSI rights and interests production capacity further increased. The company's electrolyte lithium hexafluorophosphate and LiFSI production capacity is located in the subsidiary Shao Wu Yongtai, which used to hold 60% of the shares. This acquisition will increase the shareholding ratio of Shao Wu Yongtai to 75%. Shao Wuyongtai currently has 2000 tons of lithium hexafluorophosphate, which is expected to reach 8000 tons by the end of 2021, with a follow-up increase of 20,000 tons, with a construction period of three years; and the company currently has 2000 tons of new lithium salt LIFSI, with a subsequent increase of 1500 tons. The increase in shareholding ratio will increase the company's equity production capacity of lithium hexafluorophosphate and LiFSI by 1200 tons and 300 tons at the end of 2021. And, according to the material procurement agreement between CATL and the company, CATL will total 24200 tons of lithium hexafluorophosphate produced by the holding subsidiary of the procurement company by December 31, 2026. This increase in shareholding will increase the company's subsequent equity production capacity and better benefit from the sales of the company's electrolyte business driven by the CATL purchase agreement.

Create a scarce one-stop supply platform for electrolyte materials in the industry. The company is currently one of the most complete electrolyte material supply platforms in the industry. Electrolyte additives, the company is building 5000 tons of VC, 3000 tons of FEC. VC is one of the most scarce lithium materials at present, the core reason is that VC has high self-polymerization, and the self-polymerization phenomenon will increase with the increase of equipment capacity, which makes its purity difficult to meet the requirements of lithium batteries. Therefore, at present, the effective production capacity of VC in the industry is far lower than the total capacity, and the shortage of supply is gradually aggravating. Based on years of distillation technology accumulation and equipment foundation in the field of fluorine-containing fine chemicals, the company has a strong competitive advantage in the field of VC distillation purification and device magnification, and the additive products are expected to fill the market gap quickly after reaching production. In the medium and long term, the discourse power of the industrial chain is expected to transfer to the electrolyte material link, and the company simultaneously distributes two kinds of electrolyte lithium hexafluorophosphate, LiFSI, and two mainstream additives VC and FEC, to achieve horizontal full coverage of mainstream electrolyte materials, and to build a "one-stop purchasing supermarket" for customers. In the future, benefiting from the deep cooperation with CATL, the leading manufacturer of power batteries, the company is expected to achieve continuous extension in the integration of product volume, product categories and industrial chain, with huge room for growth.

Investment suggestion: we estimate that the operating income of the company from 2021 to 2023 will be 44.50cm, 98.06pm, 130.07 billion yuan, respectively, the net profit of return to the mother will be 6.01x230pm, 3.508 billion yuan, respectively, and the corresponding PE will be 33.8, 9.1pm, 5.8 times respectively. Based on the technical accumulation in the field of fluorine-containing fine chemicals and the rapid expansion of lithium materials production capacity, the equity upgrading of Shao Wuyong Tai, a subsidiary, has further increased the equity production capacity of the company's electrolytes lithium hexafluorophosphate and LiFSI, and maintained its "buy" rating.

Risk hint: the new production capacity of lithium materials is not as expected, the price of lithium materials is falling, and the performance of traditional business is lower than expected.