Description of the event
2021Q1-Q3 achieved revenue of 670 million yuan, an increase of 25% over the previous year, net profit attributable to 130 million yuan, an increase of 10% over the previous year, and an increase of 6% after deducting non-performance. 2021Q3 achieved revenue of 210 million yuan, up 6% year on year, net profit attributable to 0.4 billion yuan, down 16% year on year, and net profit after deducting non-net profit decreased 25% year on year.
Incident comments
The phased revenue was affected by downstream electricity restrictions. Revenue increased by about 25% year over year in the first three quarters, and revenue increased by about 6% in the third quarter alone. Pearlescent materials are widely used in coatings, plastics, automobiles, cosmetics, inks and other industries. Revenue growth slowed in the third quarter, mainly due to power restrictions affecting downstream demand and a significant increase in shipping costs.
Higher raw materials have put pressure on gross margins. The gross profit margin for the third quarter was about 37.3%, up 3.0 percentage points from the previous quarter. If caliber adjustments are not taken into account, gross margin fell 5.5 percentage points year over year, mainly due to significant increases in the prices of coal, tin tetrachloride, titanium iron ore, etc. The rate for the third quarter period was about 15.6%. If caliber adjustments were not taken into account, the year-on-year increase was 0.7 percentage points. Among them, sales, management, R&D, and finance rates changed by -1.6, 0.7, 0.5, and 1.0 percentage points respectively; on a month-on-month basis, the rate for the period increased 1.8 percentage points from month to month. The company's total profit fell 4.2% year on year, but due to a phased increase in the income tax rate (14.1% in the 3rd quarter, 2.4% in the same period last year), the final attributable net profit fell 16% year on year, and the corresponding attributable net interest rate was about 19.6%, down 5.2 percentage points year on year.
Judging from the investment progress, in August 2019, the company's annual production of 200,000 tons of titanium dioxide project began trial production, which reached a stable state in 2020 to achieve continuous large-scale mass production; in December 2020, trial production of the 200,000 tons of titanium dioxide project began (matching 1.6 million tons of titanium dioxide), which has now reached a certain scale of mass production, and is expected to gradually reach a stable state by the end of 2021. In terms of capital expenditure, as of 2021H, the company's projects are under construction of about 501 million yuan, intangible assets of about 270 million yuan. In addition to the 2021H conversion portion (about 140 million yuan), the initial investment amount of the Fuji factory (already consolidated in 2019, about 240 million yuan), the current cumulative investment amount is about 1.2 billion yuan.
It is expected that the ore cost of Kuncai Technology's titanium chloride production line will be lower and more environmentally friendly. Based on the EIA report, we compared Kuncai Technology and Longbai Group's 200,000 tons of titanium dioxide investment plans: 1) Kuncai's investment amount of 200,000 tons of titanium dioxide platinum dioxide is 1.5 billion yuan, which is not much different from Longbai Group; 2) Kuncai ore costs lower. Although the annual consumption of titanium iron ore is twice that of high-titanium slag, the overall ore cost is lower; 3) Kuncai's energy consumption and pollutant emissions are lower, and carbon pollution and other emissions of petroleum are not used in the process, so carbon pollution and other emissions are not used in the process. Emissions are lower. Under the two-carbon policy, the company's cost advantage is expected to continue to be consolidated in the medium to long term.
The company is a global leader in pearlescent materials and continues to be optimistic about the steady growth of its main business and the gradual release of new products. It is estimated that the company's net profit for 2021-2022 will be about 2040 million yuan, corresponding to the valuation 88 and 42 times the purchase rating.
Risk warning
1. There has been a sharp decline in the global economy;
2. The progress of putting the new project into operation fell short of expectations.
