Investment Rating - The report gives an "Accumulate" rating for the company, marking its first coverage [1][7]. Core Insights - The acquisition of 100% equity in Jinli Co., a leading player in the wet diaphragm sector, has been approved by the Shenzhen Stock Exchange, which is expected to significantly enhance the company's performance in the lithium battery diaphragm market [1][7]. - The company has been focusing on high-end materials and traditional films since its entry into the lithium battery diaphragm sector in 2011, and the acquisition is seen as a strategic move to strengthen its position in the wet diaphragm market [1][11]. - The demand for lithium batteries has been growing, leading to a recovery in the supply-demand dynamics of diaphragms, which is expected to result in industry-wide profitability improvements [1][7]. Financial Data and Valuation - Total revenue is projected to be 2,215 million yuan in 2023, with a year-on-year decline of 16%, followed by a slight increase of 1% in 2024 [2]. - Operating profit is expected to be 224 million yuan in 2023, with a significant year-on-year growth of 23%, but a decline of 26% is anticipated in 2024 [2]. - Net profit attributable to shareholders is forecasted at 214 million yuan in 2023, reflecting a substantial year-on-year increase of 57%, but a decrease of 44% is expected in 2024 [2]. - The company’s price-to-earnings (PE) ratio is projected to be 55.2 in 2023, increasing to 98.6 in 2024 [2]. Acquisition Details - The acquisition of Jinli Co. is valued at 5.08 billion yuan, with 4.0 billion yuan paid in cash and 4.68 billion yuan in shares at an issue price of 3.81 yuan per share [11][12]. - The acquisition is expected to create synergies in technology, business, finance, and procurement, enhancing the company's competitive edge in the diaphragm market [31][7]. Market Position and Product Development - Jinli Co. is positioned as a major player in the wet diaphragm market, with a market share of 18% in China and 15.6% globally, ranking second in both markets [17]. - The company has successfully introduced a 5μm ultra-thin high-strength diaphragm into the product systems of major clients like CATL, achieving a domestic market share of 63% in this segment [28][17]. - The demand for 5μm ultra-thin high-strength diaphragms is expected to grow significantly, with projections indicating a market penetration of over 20% by 2025 [47][28]. Industry Outlook - The wet diaphragm industry is anticipated to experience a recovery in profitability, driven by increasing demand for lithium batteries and limited capacity expansion among major players [32][33]. - The industry is witnessing a trend towards thinner and stronger diaphragms, with the 5μm product expected to replace the 7μm and 9μm products in the market [47][28].