Established industrial groups are expected to embark on a new journey of governance optimization. Baoan, China covers three major business segments centered on lithium battery materials, biomedicine, and real estate. Its subsidiary, Betry, is a global leader in lithium battery material anode materials, and its cathode business is developing steadily. Its subsidiaries, Ma Yinglong and Dafo Pharmaceutical, are mainly engaged in the pharmaceutical manufacturing business. The company has been deeply involved in real estate for more than 30 years, “Jiangnan series

“Column” has formed a certain level of brand influence. The Guangdong People's Investment Bureau is expected to rationalize corporate governance, optimize the management structure, and activate employee motivation. With its strong ability to integrate resources, it is expected that its industries will be sorted out in a new round, focusing on the core business of lithium battery materials and pharmaceuticals, driving the Group to embark on a new journey.

Lithium battery materials: negative electrode+high nickel cathode double tap, accelerated expansion of production capacity. 1) Negative electrodes: The integrated layout adds cost advantages, and the silicon-carbon anode takes the lead. Based on natural graphite, Betterley has the highest number of anode shipments in the world for many years. Artificial graphite later took the lead, and the advantages of integrated industrial chain layout are obvious. Betry continues to lead the layout of the next generation material, silicon-carbon anodes, and has entered Panasonic and Samsung supply chain systems to support companies that can achieve large-scale mass production of silicon-carbon anodes. Furthermore, Betry gradually began an integrated layout, covering the two core cost factors of needle coking and graphitization. It is expected that the cost advantage will expand further after the new production line is put into operation. 2) Cathode: Betry's cathode core products include NCA, NCM811, etc., which have now passed certification from overseas core customers, and production capacity is progressing steadily. The company's core customers are the main beneficiaries of European and American electrification. With the implementation of the US electrification incentive policy and the continuous acceleration of penetration in Europe, it is expected that Betry's Cathode business will usher in a period of rapid growth.

Pharmaceuticals & Real Estate: 1) Pharmaceuticals: The company holds 29% of Ma Yinglong's shares. It is a 400-year-old pharmaceutical company with deep brand influence. Ma Yinglong is an industry leader in anorectal business, with a market share of nearly 50%. At the same time, it continues to expand big health and medical diagnosis business. In 2017-2020, revenue grew steadily, from 1.75 billion to 2.79 billion, 2021Q1's revenue was 860 million, +157% year on year, and Guimu's net profit was 117 million, +7.2% year on year. As the new business continues to expand, revenue and profit are expected to increase further. 2) Real estate: Influenced by the industry level, the company's real estate business is under pressure. The company actively adjusted its development strategy, gradually divested non-core assets to drive a rapid return of capital. The disposal of shares in Hong Kong Bao Real Estate, Hubei Baoan, etc. in 2020, and the disposal of 501 million yuan in profit and loss improved the company's capital situation, which is conducive to the company's active transformation into a high-tech industry group.

Investment recommendations: The company's revenue for 2021-2023 is estimated to be 14.6 billion, 20.4 billion, and 27.7 billion, respectively, +37.8%, +39.5%, and +36.2%, respectively, and net profit of 630,000, 1,256 million and 2.16 billion respectively, and -4.7%, +99.2%, respectively. EPS is 0.24 yuan, 0.49 yuan, 0.84 yuan, and corresponding PE is 71 times, 36 times and 21 times, respectively. Using segmental valuation, with reference to comparable companies in the lithium battery and pharmaceutical sectors, the lithium battery sector (Betry) was valued 81 times and the pharmaceutical sector (Ma Yinglong) was valued 39.8 times. The corresponding market value of the company in '21 was 73.72 billion. It was covered for the first time, and a “holdings increase rating” was given.

Risk warning: The NEV subsidy policy fell short of expectations, NEV sales fell short of expectations, the accelerated expansion of industry production led to the risk of lower prices than expected, and the risk of deviations in industry estimates. The company's capacity expansion fell short of expectations, and the price of anode products fell short of expectations. Risk of deviations in the company's production capacity and sales estimates: Based on certain assumptions, based on certain assumptions, there is a risk that actual capacity and sales estimates fall short of expectations. Losses in some businesses have increased, and the progress of asset consolidation has fallen short of anticipated risks.