Event description
The company's revenue in the first three quarters of 2022 was 650 million yuan, down 2% from the same period last year, and the attributable net profit was about 80 million yuan, down 37% from the same period last year. The revenue in the third quarter was 250 million yuan, up 16% from the same period last year, and the attributable net profit was 20 million yuan, down 44% from the same period last year, and 41% from the same period last year.
Event comment
From pearlescent materials to titanium dioxide, after nearly four years of production line investment and optimization, will start the growth of new business. The company's main business has changed in the past few years, with products extending from pearlescent materials to titanium dioxide, which means moving from the segment of inorganic pigments to the mainstream market. The company's core competitiveness lies in the innovative use of hydrochloric acid extraction to produce titanium and iron oxides at low cost, which is suitable for both pearlescent materials and titanium dioxide. Reviewing the process of putting into production, what we can see is the persistence of new material enterprises on the road of innovation: the company's first hydrochloric acid extraction titanium dioxide project was launched in 2018, and the trial production of 200000 tons of titanium dichloride began in August 2019. It will reach a stable state by 2020 and achieve continuous large-scale mass production. The titanium dioxide project with an annual production capacity of 100000 tons in December 2020 began trial production and officially ran out in 2022. After continuous equipment optimization and process adjustment, the company's current production status can be defined as "stable scale production".
Titanium dioxide revenue is reflected in the statement for the first time, taking a solid step forward. The company's revenue fell 11% in the first half of the year compared with the same period last year, and increased by 16% in the third quarter compared with the same period last year. The acceleration of revenue in the first half is mainly due to the fact that titanium dioxide began to contribute to sales revenue. If titanium dioxide is excluded, the revenue of pearlescent materials is expected to decline slightly compared with the same period last year. It is mainly due to the pressure on the downstream demand of pearlescent materials, especially in the field of architectural coatings; at the same time, the company's exports account for a relatively high share, and the export business is under pressure against the background of weaker global demand in the third quarter.
The lack of improvement in profitability is mainly due to higher depreciation. At the end of the third quarter, the inventory value of the company is stable compared with the second quarter, but it is expected that some raw materials ilmenite have been transformed into finished products, and the inventory structure has changed. The company's gross profit margin in the first three quarters was about 32%, down about 6% from the same period last year, of which the gross profit margin in the third quarter was about 28%, down about 9% from the same period last year, or mainly due to the low capacity utilization at the initial stage of the new line was put into production, resulting in an increase in unit depreciation and related expenses. Depreciation costs can be referred to the decrease in fixed assets in the third quarter compared with the second quarter, which is the main reason for the periodic pressure on gross profit margin. During the third quarter, the rate was about 15.3%, down 2.7 percentage points from the previous month and 0.4 percentage points from the same period last year; the final attributable net interest rate was about 9.4%, down about 10 percentage points from the same period last year. To sum up, the periodic sharp decline in gross profit margin is the core reason why the performance does not match income.
We think it is the time before dawn. As a project with independent intellectual property rights and the first set of third-generation titanium dioxide extraction process certification, the company produces high-purity and high-quality titanium dioxide from low-cost ilmenite and produces high value-added by-product iron oxide. there is a significant and fundamental improvement in energy consumption, safety, environmental protection, production environment and quality, which is in line with the national industrial policy and industry development direction. At present, the company's application for non-public offering of A-shares has passed, and the total amount of funds raised is not more than 3.85 billion yuan, which is used for Zhengtaixin material to add 600000 tons of titanium dioxide project. According to the feedback announcement, the first phase of 200000 tons of titanium dioxide is expected to release 40%, 100% and 100% production capacity respectively from 2022 to 2024, and the overall income is estimated to be 15, 37 and 3.7 billion yuan, compared with 900 million yuan of pearlescent materials in 2021, there is huge room for growth.
It is estimated that the net profit attributable to the company from 2022 to 2023 will be 2.1 or 1.41 billion yuan, corresponding to the valuation of 137,20 times, continue to recommend.
Risk hint
1. The climbing rhythm of the production line is low.
2. The price of raw materials remains high.
