2023Q1's net profit to mother increased slightly by 3.45% month-on-month, maintaining a “buy” rating
The company released its 2023 quarterly report, achieving operating income of 445 million yuan, a year-on-year decrease of 25.12%, and realized net profit of 232 million yuan, a year-on-year decrease of 34.58% and a year-on-year increase of 3.45%. The company's performance is basically in line with expectations. We maintain the company's profit forecast for 2023-2025. We expect net profit to be 1,244 billion yuan, 1,339 billion yuan, and 2,037 billion yuan for 2023-2025, and EPS of 3.15 yuan, 3.34 yuan, and 5.08 yuan respectively. The current stock price corresponding to PE is 10.9 times, 10.3 times, and 6.8 times, respectively. We are optimistic that the titanium project will contribute an important increase in the company's performance and maintain a “buy” rating.
The price of 2023Q1 titanium concentrate rose slightly, and the price of iron concentrate is expected to rebound from the bottom
Since 2023, along with downstream inventory replenishment and improved terminal demand, the price of titanium dioxide has gone through many rounds of increases, and the industry's profit level has also been restored. According to the company announcement, 2023Q1's net investment income changed from negative to positive month-on-month (2022Q4 was -10 billion yuan). This is probably mainly due to an improvement in the profits of the subsidiary Dongfang Titanium's titanium dioxide business. At the same time, benefiting from the gradual recovery in demand for titanium dioxide, the upstream titanium concentrate chain continues to maintain a tight supply and demand trend, and the price of titanium concentrate also rose slightly. According to Baichuan Yingfu data, the average price of titanium concentrate in the domestic market (average price of high grade and low grade titanium concentrate) reached 2014 yuan/ton in 2023Q1, up 2.99% from the average price in 2022/Q4. In terms of iron concentrate, the current price of vanadium-titanium-iron concentrate is basically at the bottom of the cycle. In the future, along with marginal improvements in the domestic real estate industry and continued growth in infrastructure investment, steel demand is expected to be strongly supported, and vanadium-titanium-iron concentrate prices are also expected to rebound to the bottom.
The cost advantage of the titanium project is remarkable and is expected to contribute an important increase to the company's performance
According to the company's announcement, the company plans to invest in the construction of a “full industry chain project with an annual output of 60,000 tons of energy-grade titanium (alloy) materials”, with a total investment of 7.2 billion yuan. The construction of the project covers the entire “vanadium-titanium-magnetite - sponge titanium-titanium ingot, titanium plate - energy-grade titanium (alloy) material” industry chain, and is expected to be completed and put into operation in 2024Q4. We believe that the company's titanium project has many cost advantages, such as complete self-supply of the raw material titanium concentrate, low electricity costs and sufficient supply, scale advantages, and full-process production. As an important step in extending the company's downstream vanadium-titanium magnetite industry chain, the titanium project is expected to contribute an important increase to the company's performance in the future.
Risk warning: Economic recovery falls short of expectations, sharp drop in product prices, project commissioning falls short of expectations, etc.