Core viewpoints

The company issued a performance forecast that the net profit of homing in 2022 is expected to increase by 35.8% to 220 million yuan, thanks to a rise in the volume and price of pearlescent pigments. The company reached a merger agreement with South Korea's pearlescent pigment leader CQV to acquire 42.45% of the shares of the other party, which is expected to quickly increase the company's international market share, strengthen market pricing power, and enrich product applications; fully grasp the rapid growth opportunities of the automotive and cosmetic pearlescent pigment market, and improve the company's global competitiveness in an all-round way. Reviewing the company's business plan, new energy battery materials are expected to continue to develop and broaden the ceiling of the main business in the future.

Events:

On January 20, the company issued a performance forecast, which is expected to achieve a net profit of 220 million yuan, an increase of 35.8% over the same period last year. On January 27, the company reached a merger agreement to purchase some of the shares held by CQV's former shareholders and stock shares of the company for a total consideration of about 85.9 billion won (equivalent to about 470 million yuan). Upon completion of the transaction, Global New Materials International will hold 42.45 per cent of the issued shares of South Korea's pearlescent pigment leader CQV.

Comments:

1. Pearlescent pigments: the volume and price of pearlescent pigments rose rapidly in 2022, and the volume and price of the company's pearlescent pigment products rose rapidly in 2022, which is expected to increase profits by 35.8% to 220 million yuan. In addition, through research and development and continuous technological innovation, product structure optimization is also an important factor in improving the company's profitability. In the second half of 2022, the construction of 6000 tons of pearlescent pigment production capacity in the first phase of the second phase of the company's plant has been completed, and it is expected that it has gradually entered the stage of trial production at the beginning of 2023, focusing on the production of high-end automotive and cosmetic products. It is expected that the company will separately arrange cosmetic-grade pearlescent pigment production lines, and through the new expansion of the original synthetic mica plant to achieve substrate supply, significantly increase the proportion of high-end products. Capacity expansion + structural optimization will make the company's performance show high flexibility. In the next 3 years, the fund-raising project 30,000 tons of pearlescent pigment production capacity and supporting synthetic mica production capacity will be released in an orderly manner, supporting the company's traditional main business growth.

2. Purchase Korean CQV, pearlescent pigments or accelerate the layout of the international market CQV is the largest pearlescent material company in Korea, with the world's leading manufacturing technology and technology in automotive, cosmetic and other high-end pearlescent materials applications. In 2022, CQV revenue fell 7.58% year-on-year to 36.972 billion won (about 200 million yuan), while after-tax net profit rose 3.81% year-on-year to 3.648 billion won (about 20 million yuan). Global New Materials International's cross-border merger and acquisition of CQV can quickly enhance the company's international market share, strengthen market pricing power, enrich product applications, fully grasp the rapid growth opportunities of automotive and cosmetic pearlescent pigment market, and improve the company's global competitiveness in an all-round way.

3, reviewing the company's business plan, mergers and acquisitions + new energy battery materials are still the way forward. On November 13, 2022, the company issued a voluntary announcement focusing on the following operating results and objectives: ① expects to increase its market share ranking; ② Phase II plant is about to be put into production; ③ products can be used as new energy battery materials; ④ explores M & An opportunities; ⑤ makes use of international capital market advantages; ⑥ may increase the proportion of controlling shareholders. The improvement of performance and market share and the promotion of production capacity construction are the results of the company's past operations; the issuance of convertible bonds at the end of 2022 and the current acquisition of CQV are implementing the company's business policies and plans; and the R & D and exploration of new energy battery materials is also expected to be the direction of the company's continuous efforts.

1) there is still room for financing + mergers and acquisitions: on December 28, 2022, the company announced plans to issue 500 million yuan of offshore RMB convertible bonds (300 million yuan in issue A + 200 million yuan in issue B). The company believes that the issuance of convertible bonds can appropriately raise additional equity and provide the company with additional funds to explore investment opportunities without increasing leverage. The company's current asset-liability ratio is extremely low, with only 10% at the end of 2021, and there is still room for potential debt. At present, the concentration of the industry is not high, and there is room for the integration of domestic and foreign channel resources. high shareholding and very low level of debt can provide important prerequisites for potential extension growth.

2) New energy battery materials broaden the ceiling of the main business: Mica is a kind of insulated, heat-resistant, corrosion-resistant and stable environmental protection material, which can improve the safety of new energy batteries through separators, fillers and other forms. Since the joint research and development with Zhejiang University in September 2021, the company has continuously stored the technology related to synthetic mica products. With the construction and production of the second phase of the synthetic mica plant, as well as the continuous development of downstream customers, the company will usher in the second growth curve and broaden the revenue ceiling.

Investment suggestion: the company's main business of pearlescent pigments has improved steadily, the merger and acquisition integration plan is beginning to bear fruit, and it is expected that the future expansion in the field of new energy battery materials will also be effectively realized. Only considering the main industry and endogenous growth of Pearl Light, we estimate that the revenue of the company in 2022-2024 is 8.83,11.54 and 1.607 billion yuan, and the net profit is 2.20,2.91 and 411 million yuan, corresponding to the dynamic PE of 24.23,18.30,12.98 times in 2022-2024. Take into account the company's high growth and low valuation, maintain the "buy" rating.

Risk tips: 1) the production capacity of the fund-raising project is not as expected; 2) the new business development is not as expected; 3) the progress of M & An is not as expected.