The company announced its intention to acquire Jiahao shares: On February 20, the company signed the “Equity Acquisition Framework Agreement” to acquire 100% of Jiahao shares in cash. The overall valuation is tentatively estimated at $480 million. In 2022, the net profit of Jiahao shares was 0.29 million yuan, corresponding to the acquisition of PE, and as of 23Q3, the net assets of Jiahao shares were 353 million yuan, corresponding to the acquisition of PB about 1.36X. Jiahao Co., Ltd. is a company listed on the New Third Board. It applied for a GEM IPO in 2022 and then terminated.
Jiahao Co., Ltd. specializes in hot-melt pressure-sensitive adhesives. In 2018-2022, the CAGR reached 16%. The main business of Jiahao Co., Ltd. is hot-melt pressure-sensitive adhesives. By the end of 2022, it had a production capacity of 80,000 tons of hot melt pressure-sensitive adhesives. Product structure in 2022: Revenue from disposable hygiene materials was 374 million yuan (accounting for 47%), revenue from the label series was 371 million yuan (accounting for 47%), and revenue from polymer waterproof materials was 41 million yuan (accounting for 5%). Among them, the downstream application fields of disposable hygiene materials were mainly sanitary napkins, diapers, protective clothing for epidemic prevention, etc. The downstream application areas of the label series were mainly coated paper labels, PP synthetic paper labels, and express delivery surfaces.
Financial performance: ① Jiahao's revenue increased from 441 million yuan in 2018 to 795 million yuan in 2022, with a CAGR of 16%. In each year, it generally maintained a 12-20% revenue growth rate and alternating growth in downstream application areas. For example, consumer demand for online shopping, takeout, and FMCG terminals continued to increase in 2021. The revenue for label series products increased by +31% year over year, benefiting from overseas market recovery in 2022, and revenue from disposable hygiene materials +49% year over year. 23Q1-Q3's revenue was 590 million yuan, +1.14% year over year. ② Jiahao's net profit increased from 14.63 million yuan in 2018 to 29.17 million yuan in 2022. The CAGR fluctuated significantly from year to year, mainly due to fluctuations in raw materials (mainly SIS and rubber oil) affecting gross profit margin. For example, in 2020-2022, Jiahao's gross margin was 17.79%, 13.19%, and 12.04% respectively, and net profit also declined year by year. As the pressure on raw material prices eased, 23Q1-Q3 Jiahao's gross margin recovered to 15.09%, with net profit of 39.77 million yuan, +119% year-on-year.
Peer reference: Jiahao's downstream application scenarios are biased towards consumption. Currently, market shares are mainly held by leading overseas companies such as German Henkel, American Fuller, and French Bosco. In terms of domestic investment, Jiahao's business model is comparable to Polyvinyl Co., Ltd., which currently has a production capacity of 103,000 tons of hot-melt pressure-sensitive adhesives in Guangzhou, 61,000 tons (trial production will begin in October 2022) +120,000 tons of the new Guangzhou plant (construction will begin in October 2022). The main products are sanitary hot melt adhesives, with 2022 revenue of 1,351 billion yuan, and a net profit of 87.29 million yuan (as of February 20).
Expand overseas, expand epitaxial
The acquisition of Jiahao shares is expected to have a synergistic effect in the market, region, product, etc.: ① From a market perspective, Jiahao's overseas revenue in 2022 is 242 million yuan, accounting for 30%. The main export regions are concentrated in Europe (Britain, France, Russia, etc.) +Asia (Turkey, Indonesia, Vietnam, etc.) +South America (Brazil, Chile, etc.). In 2022, Silicon Bao's export revenue was 132 million yuan, accounting for only 5%. It is estimated that after the acquisition, Silicon Bao is expected to use Jiahao to expand overseas channels, and at the same time, Silicon Bao can also empower Jiahao domestically; ② From a regional perspective, in January 2024, Silicon Bao signed an “Investment Agreement” with the People's Government of Zhuanqiao Town, Minhang District, Shanghai to purchase 16 acres of industrial land and invest 150 million yuan to build advanced organic silicon materials research and industrial development projects. Jiahao is based in Shanghai and Taicang, Jiangsu, and the acquisition of Silicon Bao is expected to deepen the product layout in East China ③;, acquisition Jiahao later expanded its product line, and the company has extensive experience in outward mergers and acquisitions.
Investment advice: The company has disclosed a quick performance report. It expects revenue of 2,605 billion yuan in 2023 and net profit of 315 million yuan to mother, +25.9% over the same period last year. Considering the rapid performance report and the company's proposed acquisition of Jiahao shares, we slightly adjusted our profit forecast. We expect the company's net profit to be 3.15, 3.96, and 488 million yuan respectively in 2023-2025, and the current price corresponding to the 2023-2025 dynamic PE is 17x, 13x, and 11x, respectively. Continued key recommendations: ① Construction adhesives continue to increase their market share, and distribution channels are increasing; ② industrial glue photovoltaics and power batteries are breaking through the volume of major customers; ③ silicon carbon anodes are speeding up construction; ④ it is planned to acquire high-quality Jiahao shares to speed up overseas. Maintain a “Recommended” rating.
Risk warning: Real estate completion falls short of expectations; penetration in the industrial rubber sector falls short of expectations; raw material prices fluctuate.