Introduction to this report:
The company's performance for the 3rd quarter of 2023 was 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 the “Overweight” rating. In the first three quarters of 2023, the company achieved revenue of 1,377 million yuan, a year-on-year decrease of 8.81%, and 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 net profit for 2023-25 at 1,027/10.96/1,335 billion yuan, corresponding to EPS of 2.56/2.73/3.33 yuan. Maintain the company's target price of 37.83 yuan and maintain the “increase in holdings” rating.
The titanium alloy project has advanced technology and obvious resource advantages. The company's main process package for energy-grade titanium materials is procured from PDUS. This process has been successfully adopted by many domestic titanium companies. The production line and engineering technology for this project were carried out by Enfi in China. The company has successfully designed for many domestic enterprises, and the technology is feasible. The Panjiatian iron ore owned by the company is one of the core resources of vanadium-titanium magnetite in the Panxi region, and 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.
The supply and demand of titanium concentrate are tight. We have observed that in the first half of 2023, according to reports from domestic and foreign titanium ore enterprises, production in the first half of the year of some enterprises fell short of expectations, annual production guidelines were lowered, and after long-term mining in some mines, there was a problem of resource depletion. The increase in titanium ore was very limited, supply and demand for titanium concentrate maintained a tight balance, and it is expected that the price of titanium concentrate will continue to be strong.
Iron ore prices were strong in the 3rd quarter. Iron ore supply and demand were relatively stable. At the end of September, iron ore port stocks were 114 million tons, down 14 million tons from the end of June. 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 construction projects falls short of expectations, and steel demand has declined sharply.