Incident: Silicon Bao Technology released its 2024 three-quarter report. In the first three quarters, it achieved operating income of 2.133 billion yuan, an increase of 11.51% year on year; net profit attributable to shareholders of listed companies was 0.158 billion yuan, a decrease of 29.15% year on year.

Based on the total share capital of 0.393 billion shares, earnings per share were 0.41 yuan.

Among them, the third quarter achieved operating income of 0.974 billion yuan, a year-on-year increase of 35.5% and a month-on-month increase of 42.4%; net profit attributable to shareholders of the parent company was 0.057 billion yuan, a year-on-year decrease of 37.9% and a decrease of 8.0% month-on-month, achieving earnings per share of 0.14 yuan.

The acquisition of 100% of Jiahao shares contributed to the increase in revenue through financial consolidation. The company's revenue increased by 0.255 billion yuan year-on-year in the third quarter, mainly due to the combined revenue of the subsidiary Jiahao Co., Ltd. of 0.27 billion yuan.

The company completed the second share settlement in September and actually controlled 76.50% of Jiahao shares. The profit promise of Jiahao Co., Ltd. for 24-26 is net profit of not less than 42/43.5/45 million yuan, respectively, and the total net profit promised over three years is not less than 0.131 billion yuan, which is expected to provide an increase in the company's performance.

By business area, 24Q3's construction adhesives continued to maintain steady growth in sales, and industrial adhesives maintained rapid growth in electronics, photovoltaics, power batteries, automobile manufacturing and other industries.

Product prices fell and expenses increased, and the profit scale decreased year-on-year. In the first three quarters of 24, the company achieved gross profit of 0.44 billion yuan, a year-on-year decrease of 9.8%; the gross profit margin was 20.6%, a year-on-year decrease of 4.9 pcts. Among them, 24Q3 achieved gross profit of 0.18 billion yuan, a year-on-year decrease of 5.8% and a month-on-month increase of 16.8%; gross profit margin of 18.5%, a year-on-year decrease of 8.1 pcts, and a month-on-month decrease of 4.1 pcts.

Due to the year-on-year decline in the price of silicone raw materials, the sales price of the company's products has declined. According to Baichuan Yingfu, the average price in the DMC (East China) market in the first three quarters of 24 was 0.0143 million yuan/ton, down 5.3% from 0.0151 million yuan/ton in the same period in '23.

In terms of expenses, the company's total expenses for the first three quarters of 24 were 0.25 billion yuan, an increase of 0.04 billion yuan over the previous year; of these, sales/management expenses increased 0.018/0.025 billion yuan year on year, R&D expenses remained flat year on year, and financial expenses decreased by 0.003 billion yuan year on year. The total cost for the 24Q3 period was 0.11 billion yuan, an increase of 0.024 billion yuan over the previous year. The increase in expenses during the period was mainly due to the company's increased investment in R&D, marketing, etc. to expand the scale of sales; in addition, the increase in management expenses was mainly due to an increase in the company's equity incentive expenses.

The silicon-carbon anode project is progressing steadily. The company's 0.05 million tons/year silicon-carbon anode material and special adhesive project for lithium batteries has begun equipment installation. The first phase of 3,000 tons/year silicon-carbon anode and 5,000 tons/year polyurethane sealant is in the process of production line commissioning; the 1000 tons/year pilot production line for silicon-carbon anode materials has been produced normally and stably supplied.

Profit forecast and valuation: Combined with the company's silicone sealant price trends, Jiahao Co., Ltd.'s financial consolidation for the second half of the year, and the progress of the silicon-carbon anode project, it is estimated that the company's net profit to mother in 2024-2026 will be lowered to 0.25/0.32/0.38 billion yuan (previous value was 0.31/0.4/0.47 billion yuan) to maintain the “buy” investment rating.

Risk warning: macroeconomic downside risk, risk of large fluctuations in product and raw material prices, risk of new construction project progress and profits falling short of expectations