23H1 achieved net profit of 381 million yuan, maintaining the “bought” rating company's revenue of 3,709 million yuan (yoy +9.81%) and net profit of 381 million yuan (yoy -5.46%) in 23H1; 23Q2 achieved revenue of 1,834 million yuan (yoy +2.24%, qoq -2.16%), and net profit of 244 million yuan (yoy +45.63%, qoq +78.35%). We maintain our performance expectations. We expect the company's EPS of 23-25 to be 1.41/1.80/2.13 yuan, the average PE (2023E) value of 26.9X for comparable companies, and 26.9X PE for 23. The corresponding target price is 37.91 yuan (previous value of 38.44 yuan), maintaining the “buy” rating.
Costs fell due to falling titanium sponge prices. 23Q2 performance improvement The company is the largest specialized rare metal production research base in China, mainly titanium and titanium alloys. The annual output of titanium, the leading product, ranks among the highest among similar enterprises in the world. 23H1 achieved production and sales volumes of 16,700 tons of titanium products, respectively, with a year-on-year increase of 4.03 and 3.70% over the previous year. The company's 23Q2 performance improved month-on-month, or mainly because the price of titanium sponge fell month-on-month, resulting in a marked month-on-month decline in operating costs. According to Asia Metal Network, the average price of titanium sponge in 23Q2 was 70,000 yuan/ton, down 10% from the previous month.
The company's fund-raising project in February '21 is scheduled to be completed and put into operation in 23Q4
According to the “Notice Concerning the Postponement of Fund-raising Investment Projects” announced by the company in June '23, it raised investment projects for high-quality titanium ingots, pipes, and profiles and space-grade wide-width titanium alloy sheets and foils in February '21. The two projects are scheduled to be ready for use in October '23. After the first project is completed and put into production, it is expected to add 10,000 tons of titanium and titanium alloy ingots, 290 tons of titanium alloy pipes, and 100 tons of titanium alloy profiles per year. After the second project is completed, it is expected to add 1,500 tons/year of plate production, 5,000 tons/year of strip production, and 500 tons/year of foil production.
The company focuses on R&D and actively adjusts the variety structure
The company has a team of first-class experts in titanium and titanium alloy processing in China and a team of highly qualified employees. Professional talents account for 45%, forming a first-class rare metal specialized workforce in China. Moreover, according to the 23 annual report, the company's 23H1 R&D expenditure rate is 3.36%. The company will pay close attention to the market demand of the titanium industry, actively seek national key model research projects; introduce and absorb advanced technology at home and abroad, deepen horizontal cooperation with design institutes, efficiency and enterprises, promote brand building through technological innovation; commit to applied research on basic theory and technology, and strive to promote the rapid transformation of scientific research results. The company will focus on increasing the application ratio of the company's products in aviation, aerospace, ships, weapons, deep sea, etc., further optimize product restructuring, and increase the market share of high-end titanium.
Risk warning: Industry competition increases risk; prices fall due to lower market demand than expected; exchange rate risk; risk of fluctuations in raw material prices.