Net profit returned to the mother in 23Q1 was 230 million yuan, maintaining the “increase in holdings” rating

On April 26, Anning Co., Ltd. released its quarterly report for '23, achieving revenue of 450 million yuan, YOY -25%, net profit of 23 million yuan, and YOY -35% /qoq +3%. We expect the company's net profit to be $10.8/12.4/1.39 billion in 23-25, and the corresponding EPS is $2.69/3.09/3.47. Combined with the company's Wind's consensus forecast of 12xPE in 23, considering the growth of new projects and future new materials to enhance product competitiveness, we will give 14xPE in '23 with a target price of 37.66 yuan to maintain the “increase in holdings” rating.

The titanium mine boom gradually picked up, and Q1 net profit improved month-on-month

Along with the recovery in demand and prices of downstream titanium dioxide, titanium ore prices have gradually risen. According to Baichuan Yingfu, the average price of 23Q1 titanium concentrate (pan46) was -7% to 2,176 yuan/ton, but +4% month-on-month, helping the company's profit improve month-on-month. The 23Q1 comprehensive gross profit margin was 65.6% (-7.3pct/month-on-month -1.9 pct), and the sales/management/R&D/finance expense ratio YOY+0.1/+0.3/-0.1pct to 0.14%/3.9%/2.9%/-3.5%.

At the end of Q1, the company's balance ratio was only 14%, with monetary capital of 2.55 billion yuan.

Demand and sentiment for titanium ore are expected to continue to improve. Long-term supply pattern optimization supports profits. According to Baichuan Yingfu, as of April 26, titanium concentrate (Pan46) was priced at 2,265 yuan/ton, -1% year on year, but it has risen 7% since the beginning of the year. Looking at the short term, with the recovery of the domestic economy, demand for downstream terminals such as titanium dioxide is expected to gradually recover. Combined with the release of new production capacity in the titanium dioxide industry and the expansion of applications in emerging fields such as titanium, demand and sentiment are expected to improve, while the supply side is affected by factors such as falling global exploration capital expenditure and the decline in high-grade mines, the supply pattern is good. The titanium mine boom cycle may be long, and the company's high-quality titanium vanadium magnetite resource endowment will fully benefit.

Relying on the advantage of resource endowments, we actively extended the balance of projects under construction of the Titanium Materials and New Energy Materials Company at the end of 23Q1 to 306 million yuan, up 65 million yuan from the beginning of the year. The company will actively expand its titanium sponge and titanium material business. According to the annual report for '22, the company is steadily advancing fixed growth projects (plans to raise no more than 5 billion yuan for 60,000 tons of energy-grade titanium (alloy) materials). In addition, the 50,000 tons/year iron phosphate project with a planned investment of 500 million yuan has already entered the construction stage. Overall, based on resource endowment conditions, extending the downstream sector is expected to have supporting advantages and cost advantages in the industrial chain. The implementation of new projects one after another in the future is also expected to bring new profit growth points.

Risk warning: There is a risk that downstream demand will continue to be sluggish, and the production progress of new projects will fall short of expectations.