Net profit to mother in '23 was -21.32% year-on-year. The “holding” rating company achieved revenue of 14.38 billion yuan (yoy -4.69%) in '23, and net profit to mother of 1,058 million yuan (yoy -21.32%), of which 23Q4 net profit was 189 million yuan (yoy +61.38%, qoq -29.15%). Considering that the domestic real estate market is under pressure, the prices of vanadium and titanium products are still under some pressure. We expect the company's EPS to be 0.11/0.12/0.13 yuan in 24-26 (previous value 0.19/0.21/-yuan). Comparatively, the average PE (2024E) value of the company is 16.1 times. Considering the company's entry into the field of vanadium batteries, the growth prospects are broad. The company was given a PE valuation of 25.8 times in 24 years, corresponding to a target price of 2.84 yuan (previous value of 3.99 yuan), maintaining a “holding” rating.

Vanadium supply exceeded demand in 2023, and vanadium prices fell year-on-year. According to the company's annual report, the company's vanadium products (in terms of V2O5, same below) produced 49,800 tons (yoy +6.2%), the average price without tax was 105,000 yuan/ton (yoy -15.2%), and the gross profit margin was 27.45% (yoy-4.63pct). On the industry side, the supply and demand pattern for vanadium products deteriorated in 2023. Among them, domestic vanadium production on the supply side was about 162,000 tons, up 14.1% year on year; while demand for rebar steel, which accounts for about 70% of vanadium consumption on the demand side, decreased year on year, and demand for vanadium aluminum alloy and vanadium fine chemicals in the non-steel sector remained flat. Overall, the industry showed an increase of demand. Vanadium prices fell year on year, and gross margin was under pressure.

Titanium dioxide export demand supports the company's gross margin of titanium products +1.61pct year on year. In terms of titanium products, the company's production of titanium dioxide and titanium slag in 2023 was 25.1 and 193,400 tons (yoy +3.3%), the average price of titanium dioxide without tax was 14,000 yuan/ton (yoy -8.8%), and the comprehensive gross profit margin of titanium products was 7.89% (yoy+1.61pct), of which the gross profit margin of titanium dioxide was 10.55% (yoy+2.95pct), and the gross margin of titanium slag 0.84 (yoy-442.pct) . On the industry side, according to the company's annual report, the supply-side domestic production of titanium dioxide in 2023 was about 4.16 million tons, up 6.3% year on year. Domestic demand for titanium dioxide declined markedly under pressure on the demand side, while the increase in foreign demand led to better titanium dioxide export performance. The export volume of titanium dioxide increased 16.75% year on year in 2023, which supports demand.

Continuing to promote the industrialization of vanadium energy storage, doubling the amount of vanadium energy storage agreements in 2024. According to the company's annual report, the 1,000-ton high-purity vanadium oxide production line and the 2,000 cubic meter electrolyte production line all achieved production results. Vanadium for vanadium energy storage produced and sold more than 8800 tons of vanadium pentoxide equivalent, accounting for about 18%. At the same time, it increased its investment in the field of vanadium energy storage in 2024, and signed a strategic agreement with Dalian Rongke to supply 16,000 tons of vanadium raw materials per year. The company already has a production capacity of 44,200 tons of vanadium products, and has a complete range of products. The sales volume of vanadium for steel is leading domestically. Non-steel products have entered the large-scale production stage and continue to promote the industrialization of vanadium energy storage, which is expected to support the demand for vanadium products.

Risk warning: downstream demand falls short of expectations, production expansion progress falls short of expectations, and raw material prices fluctuate.