2、向产业链下游延伸，开辟新的盈利空间。大连融科是全球领先的全钒液流电池全产业链开发、完整自主知识产权及高端制造能力的服务商。钒钛股份是全球最大的钒原料生产基地，双方强强联合，深度绑定，共享产业链发展红利。同时公司向下游拓展了钒电解液和钒电池业务，盈利空间进一步打开。Core views
1. Vanadium prices are expected to rise. The scale of the annual framework agreement signed between the company and Dalian Rongke in 2023 was 8,000 tons, and the contract was carried out smoothly throughout the year. The scale of this year's annual framework agreement doubled to 16,000 tons, accounting for 11.3% of the country's production, and 34% of Vanadium and Titanium's own production.
The demand for energy storage is clearly driving the demand for vanadium metal. However, the supply side is constrained by special iron-vanadium separation technology, making it difficult to expand drastically, and vanadium prices are expected to rise.
2. Extend to the downstream of the industrial chain to open up new profit space. Dalian Rongke is the world's leading service provider for the development of the entire vanadium liquid flow battery industry chain, complete independent intellectual property rights and high-end manufacturing capabilities. Vanadium and Titanium Co., Ltd. is the world's largest vanadium raw material production base. The two sides have strong alliances and deep bonds to share the dividends of industrial chain development. At the same time, the company expanded its vanadium electrolyte and vanadium battery business downstream, further opening up profit margins.
occurrences
The company and Dalian Rongke Energy Storage Group Co., Ltd. signed the “2024 Vanadium Energy Storage Raw Material Cooperation Annual Framework Agreement”. The total volume is estimated to be 16,000 tons in 2024 (equivalent to vanadium pentoxide), with a spill of ± 10%. Based on the current market price of vanadium products, the total transaction amount is about 1,568 billion yuan.
Brief review
1. The scale of the framework agreement has doubled, and demand for raw materials for vanadium liquid flow batteries is strong.
The scale of the annual framework agreement signed between the company and Dalian Rongke in 2023 was 8,000 tons (equivalent to vanadium pentoxide), and the contract was carried out smoothly throughout the year. This year's annual framework agreement doubled in size to 16,000 tons, showing strong demand for vanadium flow batteries.
2. Deeply tied to upstream customers, and strong alliances greatly benefit from industrial chain development Dalian Rongke is the world's leading service provider for the development of the entire vanadium liquid flow battery industry chain, complete independent intellectual property rights and high-end manufacturing capabilities. Vanadium and Titanium Co., Ltd. is the world's largest vanadium raw material production base. The two sides have strong alliances and deep bonds to share the dividends of industrial chain development.
3. Demand for vanadium flow battery electrolytes is strong. Vanadium prices are expected to rise in 2022. Domestic production of vanadium pentoxide is 142,000 tons, and the company's output is 47,000 tons. The 16,000-ton agreement with Dalian Rongke accounts for 11.3% of the country's production, and Vanadium and Titanium Co., Ltd.'s own production is 34%. The demand for energy storage is clearly driving the demand for vanadium metal. However, the supply side is constrained by special iron-vanadium separation technology, making it difficult to expand drastically, and vanadium prices are expected to rise.
4. Grow vertically from vanadium raw material suppliers to open up new profit margins. In 2022, the company and Dalian Rongke set up a joint venture. The first phase of the 2000 m3/year electrolyte production line has now completed equipment installation and thermal load testing, and work related to trial production is being carried out; the second phase will advance the 60,000 m3/year vanadium electrolyte production capacity. In addition, the company has signed strategic cooperation agreements with China Power Investment Group Southwest Energy Research Institute Co., Ltd., Panzhihua Municipal People's Government, Dalian Rongke, etc. Future orders for the company's vanadium battery business can be expected, and vanadium batteries are expected to open up room for profitable growth for the company.
Investment advice: The company's net profit is estimated to be 14.8/18.6/2.14 billion yuan, respectively. Corresponding to the current stock price 2023/2024/2025, the PE valuation is 19/15/13 times. Considering the company's position and growth in the vanadium industry, the company's “buy” rating is maintained.
Risk analysis
(1) Vanadium price fluctuation risk. The vanadium business is the company's main source of gross profit, accounting for 76% of the gross profit of the vanadium business in 2022; vanadium prices are affected by factors such as supply and demand, economic environment, etc., and are also closely related to the development of steel, vanadium batteries, etc. Fluctuations in vanadium prices will have a certain impact on the company's cost control and profits. According to our estimates, if the price of vanadium falls by 5%/10%, the company's net profit to mother will drop 17%/34% in 2024.
(2) The price of raw materials has risen. If the prices of raw materials, labor costs, etc. rise, it will adversely affect the company's profitability.
(3) Environmental protection policies have been tightened. If environmental policies related to mineral development are tightened, it may affect the company's production of metal products.
(4) Downstream consumption falls short of expectations. If the downstream demand for the company's main products falls short of expectations, it will adversely affect the sales volume of the company's products.
