The net profit of returning to the mother was 151 million yuan,-21.60% / month-on-month-7.88% compared with the same period last year, and the performance was slightly lower than expected, mainly disturbed by the sales volume and unit price of titanium products and the rising cost. The company has the most complete titanium product types and the composition of the industrial chain. We estimate that the titanium production capacity of the company will be close to 20% in 2022-2025, and the performance is expected to continue to benefit from the military business cycle and the recovery of aviation titanium in the post-epidemic era. With reference to comparable company valuations, we believe that 45 times PE in 2022 is a reasonable valuation level for the company, corresponding to a target price of 63 yuan and maintaining a "buy" rating.
2022Q3's homing net profit fell 21.60% year-on-year, slightly lower than expected. In the first three quarters of 2022, the company realized operating income of 5.099 billion yuan, year-on-year + 10.47%; net profit of 509 million yuan, + 8.10%; and non-return net profit of 479 million yuan, + 9.36% of the same period last year. Among them, 2022Q3 achieved operating income of 1.721 billion yuan, year-on-year-3.04% / month-on-month-4.07%; realized return-to-mother net profit of 151 million yuan, year-on-year-21.60% / month-on-month-7.88%; realized non-return net profit of 139 million yuan, year-on-year-24.07% / month-on-month-5.75%.
2022Q3 gross profit margin is under pressure, titanium production and sales are lower than the previous month. In the first three quarters, the company achieved output / sales of 24,400 tons of titanium products, which was + 24.27% of the same period last year and 24.24% of the same period last year. Among them, 2022Q3 realized the output / sales of 0.85 million tons of titanium products, 4.62% of which was + 11.39% of the same period last year, and 2.42% of it was-4.24% compared with the previous year. The company achieved a gross profit margin of 22.49% in the first three quarters of 2022, a year-on-year + 1.47pcts, of which 2022Q3 achieved a gross profit margin of 19.09%, a year-on-year ratio of-1.85 pcts / month-4.99pcts. The period expense rate of 2022Q3 company is 6.77%, year-on-year + 4.52 pcts / month-on-month + 0.57pcts, of which the sales / management / finance / R & D expense rate is 0.46% + 0.26/+2.24/+0.41/+1.60pcts, 0.69% and 2.44%, respectively, year-on-year + 0.26/+2.24/+0.41/+1.60pcts, month-on-month.
2022Q3 operating disturbance factors: 1) sales: estimated demand for civilian products is lower than expected. Sales of 2022Q3 titanium products are 8200 tons, month-on-month ratio-2.42%, and sales of other metal products are 141tons, month-on-month ratio-45.66%. 2) Price: estimated unit price of titanium products shows a downward trend. 3) cost: the price of raw material sponge titanium is still in a high running state since 2021Q4, superimposing the upside of energy cost, the cost side is under pressure, 2022Q3 company gross profit is 19.09%, month-on-month-4.99pcts.
Capacity expansion CAGR is expected to be close to 20% in the next three years, welcoming the commercialization of C919 aircraft. The company's business goal in 2022 is to achieve an operating income of 5.5 billion yuan and an output of 30,000 tons of titanium products, with a current completion of 92.71% and 82.29%, respectively. With the promotion of the company's "aerospace wide titanium alloy plate and foil construction project", "high quality titanium ingot, pipe and profile production line construction project", "annual production line of 12000 tons of sponge titanium and 3000 tons of zirconium tetrachloride production line", combined with the company's goal of achieving an output of 50,000 tons of titanium products in 2025, we expect the company's titanium production capacity expansion CAGR to be close to 20% in the next three years. In addition, with the delivery of the C919 aircraft to the operator, the proportion of titanium in its body structure accounts for 9%. Under the acceleration of domestic substitution in the titanium industry chain and the catalysis of titanium warming in aviation, the company is expected to contribute to performance increment by virtue of the advantage of production capacity.
Risk factors: the growth of military orders is less than expected; the risk of continuous impact of the epidemic on downstream consumption; the risk of large fluctuations in the price of raw materials such as sponge titanium; the risk that the schedule of production capacity is less than expected.
Profit forecast, valuation and rating: as the absolute leader in the domestic titanium industry, we expect the titanium production capacity to expand by nearly 20% CAGR from 2022 to 2025. Driven by the boom in military demand and the recovery of aviation titanium in the post-epidemic era, the performance will continue to benefit. However, in view of the continued high price of sponge titanium in 2022 and the higher-than-expected rise in energy costs, we downgrade the company's 2022-2024 net profit forecast to 6.71cm 9.11 / 1.203 billion yuan (the original forecast is 8.27pm 1.023pm), corresponding to the EPS forecast of 1.40pm 1.91pm 2.52 yuan respectively. With reference to the comparable company valuation in the titanium industry (as of October 26, 2022, the average PE of Western Superconductor and Western Materials Wind is 45 times that of 2022), we give the company 45 times PE in 2022, corresponding to a target price of 63 yuan, maintaining a "buy" rating.