Company profile: The company has now formed a “new material+military” two-wheel drive business model. Among them, the adhesive and new materials business includes eight series of products with hundreds of specifications and models, which are widely used in wind turbine blade manufacturing, soft material composite packaging, rail transit, naval ship engineering, automobiles, electronics and electrical appliances, construction, machinery and equipment, and industrial maintenance. In the military sector, the company has now formed businesses such as self-developed polyimide foam insulation materials and military electromagnetic compatibility and power modules for Chengdu Bicong Technology, which was acquired in 2018. In January 2019, the actual controller of the company was changed to the State-owned Assets Supervision and Administration Commission of the Tangshan Municipal People's Government. The first phase of the employee stock ownership plan was completed in January 2020, which is expected to stimulate employee motivation. There is plenty of room for import substitution in the high-end adhesive sector, and R&D innovation drives company growth: Currently, the global adhesive market is still dominated by international giants such as Henkel, 3M, and Fuller. The domestic adhesive market is still dominated by small and medium-sized enterprises, and there is still a lot of import space to replace it in the high-end sector. The company focuses on R&D and business development in emerging fields. The compound growth rate over the past five years has reached 27%, accounting for an average of about 5% of operating income. Intrinsic and extrinsic growth go hand in hand, and the military sector continues to expand: on the basis of the polyimide foam insulation materials, military electromagnetic compatibility, and power module business now formed in the military industry sector, the company plans to gradually acquire 100% of Beijing Jinghanyu's shares to enter the field of military electronic component testing. Jing Hanyu mainly tests electronic components such as integrated circuits, crystal oscillators, power modules, relays, resistors, capacitors, and inductors. The customers are mainly military enterprises such as aviation, aerospace, weapons, ships, and scientific research institutions. The reliability of military electronic components is the core of the reliability of various types of military equipment, and the testing industry has broad prospects. The company announced that the estimated value of the first acquisition was only 823 million yuan, corresponding to the estimated performance in 2019, which is about 10 times PE, which is significantly lower than the valuation level of comparable companies currently listed. The promised net profit after tax deductions from 2020 to 2023 was 9200, 10600, 12200, and 142 million yuan respectively. The company's performance is expected to increase significantly after the acquisition is completed. Profit forecast and investment advice: Considering the acquisition of Jinghanyu, we expect the company's net profit from 2019 to 2021 to be 1.39, 1.60 and 245 million yuan (calculated based on Jinghanyu's 2020 performance commitment of 92 million yuan, 51%, 2021 performance commitment of 10.6 million yuan, and 75%), corresponding EPS of 0.55, 0.63 and 0.97 yuan/share, corresponding to three-year PE of 30.8, 26.8 and 17.5 times. First coverage, giving a “buy” rating. Risk warning: risk of macroeconomic growth falling short of expectations; risk of sharp rise in raw material prices; risk of increased market competition; risk of consolidation of acquisitions and loss of goodwill.