The three core competencies build a moat. The company's leading position is stable, R&D advantages & technical advantages build brand effects, and customer certification creates competitive barriers; integrated layout constructs cost advantages. It is a domestic titanium processing enterprise with a full industry chain. Upstream holds Baotai Huashen to ensure stable supply of raw materials; complete production capacity and products form an economy of scale. The company currently has the largest titanium production capacity in China and is in a leading position in the domestic market.
The titanium alloy cradle responds positively to downstream demand. Baotai Group is currently the largest specialized rare metal production research base in China, mainly titanium and titanium alloys. It has three major industrial sectors, including titanium, equipment design and manufacturing, and new materials. Among them, the annual output of titanium, the leading product, accounts for more than 40% of the country's total output. Focusing on the “14th Five-Year Plan” development, the Baotai Group proposed the “15551” high-quality development action plan. That is, by the end of the “14th Five-Year Plan”, the Baotai Group will rank first in the world in titanium market share and titanium production will reach 50,000 tons. Taking advantage of the brand advantages formed by Baotai Group's long-term involvement in the industry, the company's downstream sales channels are smoother.
Industry demand is accelerating, and the company has maintained a high revenue growth rate in recent years. There is a lot of room for improvement in the number of domestic military aircraft, domestic aero engines, and the amount of titanium used in stand-alone aircraft; at the same time, commercial mass production of the C919 in the civil aircraft sector is expected to bring about a large demand for titanium; in the shipbuilding sector and marine engineering, the construction of seawater desalination projects is also driving the emerging titanium market. The operating income of Baotai Co., Ltd. increased from 3.410 billion yuan in 2018 to 6.635 billion yuan in 2022. The CAGR was 18.11%. The net profit side of the net profit side increased from 141 million yuan in 2018 to 557 million yuan in 2022. The CAGR was 40.98%, maintaining a high level of growth.
Profit forecast: We expect the company's revenue for the year 23-25 to be 75.44/86.87/10.05 billion yuan, YOY +13.7%/15.2%/16.3%; in the same period, net profit of 7.19/8.51/1,115 billion yuan, YOY +29.0%/18.4%/31.1%. Considering that the production capacity structure of Baotai Co., Ltd. is superior to that of comparable companies, it can better cope with industry demand, Baotai Co., Ltd. was given a valuation of 24 times the average price-earnings ratio of the industry in 2024, corresponding to the target price of 42.72 yuan, and was given a “buy” rating for the first time.
Risk warning: customer price reduction, loss of technical advantage, excessive business concentration, and rising raw material prices.