It is proposed to acquire 100% of the shares of Jiahao Co., Ltd., a hot-melt pressure-sensitive adhesive company. The company plans to acquire 100% of Jiahao shares in cash. According to the company's preliminary assessment, the overall valuation of Jiahao Co., Ltd. is tentatively set at 480 million yuan. Jiahao Co., Ltd. is one of the leading companies in the hot melt pressure sensitive adhesive industry. Jiahao Co., Ltd. and the company have synergistic effects in terms of technology, products, markets and regions. The acquisition helps the company optimize and integrate resources, forms complementary advantages, helps further improve the company's industrial layout, expand the company's business areas, enhance the company's profit level and overall competitiveness, and is in line with the company's long-term development planning strategy. This transaction is to meet the company's strategic development and business needs, consolidate and further enhance the company's competitive advantage in the high-end sealing and bonding materials industry, enrich and improve the company's industrial layout, and enhance the company's profitability.

Silicon Bao Technology (Shanghai) Co., Ltd. was established to implement diversified development strategies. The company makes full use of Shanghai's internationalization advantages, seizes the integrated development opportunities of the Yangtze River Delta, and invests in the construction of advanced organic silicon materials research and industrialization projects, which is in line with the company's implementation of relevant diversified development strategies around the silicon materials industry. The company's establishment of the Shanghai R&D center will make full use of Shanghai's international advantages to attract high-end talents and improve the R&D system; the company will build a marketing center in Shanghai, which will better serve customers in the Yangtze River Delta economic circle and expand the company's influence and competitiveness in the global market; the company will build a new 5,000 tons/year electronic and optical packaging material production line, which will enhance the application of the company's high-end silicone sealing materials in electronic packaging, optical display, etc., and solve the technical problems of high-end materials in the silicone industry.

Projects under construction have laid the foundation for the company's growth. 1) The final 30,000 tons/year project of the company's fund-raising project of the 100,000 tons/year high-end sealant intelligent manufacturing project was built and put into operation in 2023; 2) Anhui SiBao's 8,500 tons/year silane coupling agent technology transformation project has basically been completed; 3) The 50,000 tons/year silicon-carbon anode material and special adhesive project for lithium batteries has completed infrastructure construction and is undergoing equipment installation, and will be gradually put into operation in 2024. 4) A new 1000 tons/year silicon-carbon anode production line for power batteries was completed and put into operation in April 2023. Samples are currently being tested and certified in large quantities for power battery customers. It is currently in the large-scale sample delivery stage, and will be sold in bulk in the future according to market customer needs.

Maintain profit forecasts and investment ratings. We expect the company's net profit to be 315 million yuan, 362 million yuan, and 416 million yuan in 2023-2025. Referring to companies in the same industry, considering that the company has many projects under construction and a certain growth rate to give a certain valuation premium, we believe that a reasonable valuation is 20 times PE in 2024, with a target price of 18.40 yuan, which is superior to the market rating.

Risk warning. Macroeconomic fluctuation risk; raw material price fluctuation risk; accounts receivable risk.