The company announced the acquisition of leading acoustic magnetic materials. This acquisition helps the company to integrate resources, obtain technology related to high-end vocal materials, expand the magnetic sector business, and enhance the company's overall competitiveness. The company has accumulated deep technology in the magnetic field, and is optimistic about the future performance growth of high-end magnetic materials. The company was given 1 times PEG in 2020, corresponding to a target price of 17.9 yuan, maintaining the company's “buy” rating. The acquisition of a magnetic materials company brought incremental profits to the company. The company issued the “Notice on the Foreign Asset Purchase Business of Youyan Rare Earth New Materials Co., Ltd., a holding subsidiary”, which discloses that the company's subsidiary Youyan Rare Earth and Zhukou Group have jointly established a joint venture to acquire some of Hongxiushan's assets and all assets of its subsidiary Magnet with a total of 57.36 million yuan of its own capital. Hongxiushan is a manufacturer of rare earth permanent magnet materials with revenue of 220 million yuan and net profit of 12.32 million yuan in 2018 (including Magnet). The target asset is a leader in the acoustic magnetic materials industry and the number one supplier of magnetic materials for Goertek. The company's research revealed that the target asset of this acquisition, Magnet, is Goertek's number one supplier of acoustic magnetic sheets, and has been rated as the best partner by more than 300 suppliers. Its high-performance acoustic magnetic sheets are widely used in smartphone fields such as Apple, Samsung, and Huawei. On average, 1 out of every 3 Apple phones uses a Magnet magnetic disc. Acoustic magnetic materials have entered the market, and high-end magnetic materials will fully blossom in the future. In the short term, applications in emerging fields such as TWS headsets and smart speakers are expected to explode rapidly in the next 3 years; in the long run, it is expected that sound and electricity will become another major entry point into the smart scene after optoelectronics. Future society's demand for sound quality is also putting forward higher standards for the quality of acoustic magnetic materials. The company has absolute technical advantages in various types of high-end magnetic powders. Through acoustic magnetic materials, the company has gradually transformed into downstream high-end magnetic materials. The future magnetic sector business will become another highlight of the company's performance. Risk factors: The operating risk of the subject of the acquisition, the expansion of the magnetic materials business falls short of expectations, and the profit of the target materials business falls short of expectations. Investment advice: The company actively embraces consumer market trends, acquires downstream acoustic magnetic materials companies, and highlights its intention to enter the high-end magnetic materials field in the future. The company has accumulated deep technology in the magnetic field. We are optimistic about the company's future development prospects in the field of high-end magnetic materials. We maintain the company's 2019/2020/2021 EPS forecast of 0.12/0.22/0.39 yuan, giving the company 1 times PEG in 2020, corresponding to the target price of 17.9 yuan, and maintaining the company's “buy” rating.