2023Q3's performance improved month-on-month. Maintaining a “buy” rating, the company released its three-quarter report for 2023. The first three quarters achieved revenue of 1,377 billion yuan, a year-on-year decrease of 8.81%, and realized net profit of 712 million yuan, a year-on-year decrease of 18.27%. Among them, 2023Q3 achieved revenue of 532 million yuan, an increase of 33.00% over the previous month, and achieved net profit of 268 million yuan to mother, an increase of 26.42% over the previous month. The company's performance is in line with expectations. We maintain the company's profit forecast. We expect the company's net profit to be 9.84 billion yuan, 10.63 billion yuan, and 1,475 million yuan respectively in 2023-2025, and EPS of 2.45, 2.65, and 3.68 yuan respectively. The current stock price corresponds to PE 13.6, 12.6, and 9.0 times, respectively. The company actively participated in horizontal mergers and acquisitions. At the same time, the titanium project is also expected to open up room for long-term growth and maintain a “buy” rating.

The price of 2023Q3 titanium concentrate has remained stable, and the profit of iron concentrate has improved. According to Baichuan Yingfu data, the average quarterly price of 2023Q3 domestic titanium concentrate (47% grade) was 2,309 yuan/ton, down 0.99% month-on-month from Q2, and overall titanium concentrate prices remained stable. In terms of iron concentrate, the company's iron vanadium concentrate products are a niche variety of iron ore, and the overall price trend is basically the same as iron ore. According to Baichuan Yingfu data, the average quarterly price of 2023Q3 domestic iron ore imports was 867 yuan/ton, up 5.19% from Q2. In addition, according to Wind data, 2023Q3's gross sales margin was 67.96%, up 1.93 pcts from Q2. In the context of stabilizing titanium concentrate prices, it may mainly benefit from improved profits from vanadium-titanium-iron concentrate. Looking ahead, we believe that the supply and demand pattern for titanium concentrate is still tight, and its price is expected to remain high. At the same time, along with the issuance of an additional 1 trillion treasury bonds and the advancement of a new round of “housing reform,” demand for vanadium-titanium-iron concentrate is also expected to be strongly supported.

The company actively participated in horizontal mergers and acquisitions. The titanium project is also expected to open up long-term growth space. On November 15, 2022, the company issued an announcement to form an investment consortium with the Revitalization Fund and the Silk Road Fund to participate in the recruitment of investors for the bankruptcy and restructuring of Jingji Minerals and Hongxin Industry and Trade. According to JD Auction information, the manager of the substantive merger and restructuring case of economic minerals and related enterprises will conduct a public auction to restructure investor qualifications on the JD Auction Bankruptcy and Qiangqing Platform from 10:00 on November 7, 2023 to 10:00 on November 8, 2023. According to the company announcement and information from the Sichuan Provincial Department of Natural Resources, the core asset under the name of Jingzhai Minerals is the mining rights for Xiaoheijing iron ore. The mine has 69.97 million tons of resources and a raw ore production scale of 2.6 million tons/year. The company actively participates in horizontal mergers and acquisitions, which may further increase the company's resource reserves and production capacity. In addition, the company's project for the entire industry chain with an annual output of 60,000 tons of energy-grade titanium (alloy) materials is progressing steadily, and it is expected to open up room for long-term growth for itself in the future.

Risk warning: downstream demand falls short of expectations, product prices have dropped sharply, and the project commissioning process falls short of expectations, etc.