The company is the leader of the domestic vanadium industry and the top three in the field of titanium dioxide. With the continuous acceleration of the upgrading and transformation process of the global energy structure, the collaborative development model of "renewable energy + matching energy storage" has gradually become a consensus, which is an important equipment basis and key supporting technology for the construction of a new power system. The construction of energy storage facilities and power stations is extremely urgent. All-vanadium flow battery is naturally suitable for large-scale long-term energy storage projects because of its own characteristics. With its own vanadium-titanium resource barrier, the company cooperates closely with Dalian Rongke, the leader of vanadium battery industry chain, to enter the battery electrolyte link.

As the enterprise with the highest output of vanadium products at the end of the core raw material, the company is expected to take the lead and continue to benefit from the trend of large-scale discharge of vanadium flow batteries in the future. The company's titanium dioxide business is operating steadily, actively expanding the chlorination business, and the technology of extracting titanium from blast furnace slag has made progress to further enhance the company's competitiveness in the titanium dioxide industry. We estimate that the company's EPS from 2022 to 2024 will be 0.19, 0.22, 0.32 respectively, giving the target price 6.50 yuan, covering for the first time and giving a "buy" rating.

The resource endowment creates the vanadium titanium bibcock, and the energy storage tuyere opens up the growth space. The predecessor of Vanadium and Titanium shares, Panzhihua Iron and Steel Co., Ltd., was founded in 1993. The early main business covers steel, iron, vanadium, titanium and coke. After many restructuring and mergers and acquisitions, the business structure is now stable and focused on vanadium and titanium plate, with a small amount of power business. The company is located in Panxi, with rich vanadium titanium magnetite reserves to build resource barriers. The company's vanadium output ranks first in the world, and the output of titanium dioxide is stable in the top three in China. The products are widely used in iron and steel industry, electronics industry, non-ferrous metal and paint ink, aerospace, national defense and other fields. In 2021, the company realized revenue of 14.06 billion yuan (YoY+33.4%) and net profit of 1.33 billion yuan (YoY+248.56%); 2022H1 realized revenue of 8.25 billion yuan (YoY+16.0%) and net profit of 1.07 billion yuan (YoY+55.5%). Both revenue and return net profit have achieved a high year-on-year increase, mainly due to the volume and price rise of vanadium products and the steady increase of titanium dioxide business price under the geo-conflict. Looking forward to the follow-up, if the cost reduction of the all-vanadium flow battery system is smooth and the penetration progress in the field of energy storage is in line with expectations, then the company, as the leader of the raw materials in the upper reaches of the vanadium battery industry chain, is expected to take the lead and continue to benefit, and the company's performance is expected to achieve higher-than-expected high-speed growth.

The vanadium flow battery is suitable for long-term large storage application scenarios, and the demand and price of vanadium are expected to exceed expectations if the industrialization progresses smoothly. All-vanadium flow battery has the advantages of high power, large capacity, high safety, long life, flexibility and self-controllable resources. it is a kind of energy storage battery with large capacity, deep charge and discharge, safety and environmental protection. the battery characteristics are perfectly suitable for large-scale and medium-and long-term energy storage scenarios. At present, the vanadium battery industry is in the early stage of commercialization, and driven by policy support and technology, it is expected to achieve large-scale industrialization in the next few years, and become a new strong growth point for vanadium products in addition to the iron and steel industry, which used to account for 90% of the demand. Based on the logistic curve and the permeability development trend of lithium-ion battery application in energy storage field in the past decade, considering that there is still a certain gap in energy density, conversion efficiency and initial investment between vanadium flow battery and lithium battery at the current technology level, it is expected that vanadium battery will achieve a rapid increase in permeability in the long-term and large storage market segment during 2024-2026, replacing the mainstream energy storage lithium battery. We predict that the newly installed vanadium battery may reach 9.8GW in 2030, and the gap between supply and demand of vanadium will reach 136000 tons (discount V2O5). Vanadium is expected to join the ranks of energy metals, and the ton price is expected to return to the high operation of 200000 yuan (discount V2O5).

Combine with Dalian Rongke to add vanadium battery electrolyte link. Dalian Rongke is one of the leaders in domestic vanadium battery production and system integration, a well-deserved technical pioneer in the domestic vanadium battery field, and the first leader in vanadium battery electrolyte. The international market share of vanadium electrolyte products is as high as 80%. The company announced on October 11, 2022 that the company established a vanadium financial energy storage joint venture with Dalian Rongke (51% equity). It is planned to build an electrolyte production line with a production capacity of 2000 cubic meters per year in 2022, and another 60000 cubic meters / year vanadium electrolyte production capacity in 2023-2024. In addition, one of the private offering projects announced by the company in September this year is the industrialization and application research and development of vanadium battery electrolyte, and the company continues to layout the battery electrolyte link.

According to our estimation, for the vanadium battery energy storage system with a storage time of 4 hours, the cost accounts for 50% of the system. With the increase of energy storage time, it is expected that the value proportion of electrolyte in the energy storage system will be further higher, and the electrolyte will become the core value link in the vanadium flow battery industry chain. the company is the leader of the vanadium industry, and the future production capacity is expected to reach 60,000 tons and the market share is more than 30%. The company's future performance flexibility will mainly be provided by the vanadium business plate. At present, the company has a production capacity of 40,000 tons of vanadium pentoxide, of which the annual production capacity of this part is 22000 tons, using sodium vanadium extraction technology, the main products are ferrovanadium, vanadium nitrogen alloy, but also produce vanadium aluminum alloy and high purity vanadium pentoxide (electrolyte). Holding Xichang vanadium products production capacity of 18000 tons, using calcified vanadium extraction technology. At present, the production capacity of vanadium products is the largest in the world.

The steady operation of titanium dioxide business is the ballast stone in the company's business structure. The company is one of the five domestic enterprises with titanium dioxide production line by chlorination process, and is one of the few companies with the production capacity of titanium dioxide by sulfuric acid process and chlorination process at the same time, great technical progress has been made in titanium extraction from blast furnace slag. At present, the company has a production capacity of 235000 tons of titanium dioxide, of which Chongqing titanium industry has a production capacity of 100,000 tons / year by sulfuric acid process, and Oriental titanium industry has a production capacity of 120,000 tons / year by sulfuric acid process and 15,000 tons / year by chlorination process. The company announced in September 2022 that it plans to build 60,000 tons of titanium dioxide production capacity by chlorination process, and the long-term planned production capacity by chlorination process will reach 200000 tons. The company's titanium dioxide business continues to expand the export market and increase the promotion of new products such as R249 and CR340.

Risk factors: the installed capacity of all-vanadium flow battery is lower than expected; the demand for vanadium used in traditional areas is greatly reduced due to the declining output of the iron and steel industry; the construction progress of the company's 20,000 t / a vanadium pentoxide production line is not as expected; the progress of the construction of the company's electrolyte planning project is not as expected; the prosperity of the titanium dioxide industry is declining; and the production capacity release progress of the company's chlorination titanium dioxide project is lower than expected. The approval progress of the project to raise funds for the company's non-public offering of shares is not as expected.

Profit forecast, valuation and rating: the company is not only the leader of the domestic vanadium industry, but also one of the top3 suppliers of titanium dioxide. At present, the performance increment mainly comes from vanadium products and titanium dioxide: the vanadium products business is expected to benefit from the industrialization of vanadium flow energy storage battery, which will open up a broader growth space for the company and may become the main elastic part of the company's performance growth in the future. After the titanium dioxide expansion project is successfully put into production, the titanium dioxide business will contribute to the steady growth. Based on the above analysis, we forecast that the operating income of the company in 2022-2024 will be 156.34 billion yuan, respectively. The estimated return net profit of the company in 2022-2024 will be 1.607 pound 18.92 billion yuan, and corresponding to the forecast of EPS, it will be 0.19 pound 0.22 billion yuan. Considering the business structure of the company, we use the segment valuation method to analyze the valuation of the company, and refer to the DCF valuation method to give the company a target price of 6.50 yuan in the coming year, covering for the first time and giving a "buy" rating.