Introduction to this report:

The company's results for the 3rd quarter of 2023 were in line with expectations. The recovery in titanium concentrate prices and the rise in iron ore prices led to an increase in performance.

The company's titanium alloy project continues to advance. We expect that after the titanium alloy project is implemented, the company's development space will be opened up.

Key points of investment:

Maintain an “Overweight” rating. The company achieved revenue of 1,377 billion yuan in the first three quarters of 2023, a year-on-year decrease of 8.81%, and realized net profit of 712 million yuan, a year-on-year decrease of 18.27%. The company's performance was in line with expectations. Maintain the company's 2023-25 net profit of 1,027/10.96/1,335 billion yuan, and the corresponding EPS was 2.56/2.73/3.33 yuan. Maintain the company's target price of 37.83 yuan and maintain the “gain” rating.

The titanium alloy project has advanced technology and obvious resource advantages. The company's main process package for energy-grade titanium materials was purchased from PDUS. The process has been successfully adopted by many domestic titanium companies. The production line and engineering technology of the project were commissioned by China's Enfi. The company has successfully designed it for many domestic enterprises, and the technology is feasible. The Panjiatian iron ore owned by the company is one of the core resources for vanadium-titanium magnetite in Panxi. The cost advantage of titanium resources is obvious. As of September 30, 2023, the company has invested about 399 million yuan, and the company's titanium alloy project is progressing steadily. We believe that the implementation of the titanium alloy project will bring new performance growth points to the company.

Demand for titanium concentrate is tight. We observed that in the first half of 2023, according to reports from domestic and foreign titanium ore companies, production in the first half of the year was lower than expected, production guidelines for the whole year were lowered, and some mines experienced resource depletion problems after long-term mining. Titanium ore growth was very limited, supply and demand for titanium concentrate maintained a tight balance, and titanium concentrate prices are expected to continue to be strong.

Iron ore prices were strong in the 3rd quarter. Iron ore supply and demand were relatively stable. Iron ore port stocks were 114 million tons at the end of September, down 14 million tons from the end of June, and iron ore stocks were relatively low. The average price of 61% PB powder in Rizhao Port in the third quarter of 2023 was 886 yuan/ton, up 77 yuan/ton from the second quarter. Iron ore prices rose month-on-month, driving up the company's performance.

Risk warning: The progress of new construction projects fell short of expectations, and steel demand declined sharply.