The 2023 performance is under slight pressure. I am optimistic that the company's titanium concentrate prices will remain high and that iron concentrate profits will recover
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1,856 billion yuan, -7.01% year-on-year, and realized net profit of 936 million yuan, or -14.46% year-on-year. At the same time, 2024Q1 achieved revenue of 445 million yuan, +0.03% year over month, -7.06% month on month, and realized net profit to mother 230 million yuan, -0.57% year on year and +2.50% month on month. Considering that production of the company's titanium project may be delayed, we maintain the 2024, lower 2025, and add the company's profit forecast for 2026. We expect net profit to be 10.63, 10.91 (-3.84), and 1,371 billion yuan respectively for 2024-2026, and EPS of 2.65, 2.72 (-0.96), and 3.42 yuan, respectively. The current stock price corresponds to PE 12.7, 12.4, and 9.9 times, respectively. We are optimistic that the company's titanium concentrate prices will remain high and that iron concentrate profits will recover. At the same time, the titanium project is also expected to open up room for long-term growth for the company and maintain a “buy” rating.
Volume-price split: In 2023, the volume and price of titanium concentrate fell sharply, and the amount of iron concentrate decreased and increased, putting pressure on the company's performance in terms of sales. According to the company's announcement, the company's sales volume of titanium concentrate and iron concentrate in 2023 was 493 million tons and 1.1044 million tons, respectively, compared with -3.90% and -20.24%, respectively. In terms of profit per ton, the company's sales price for a ton of titanium concentrate in 2023 was 2,331 yuan, -3.1% year-on-year, gross profit of 1,783 yuan per ton, -8.1% year-on-year, gross profit margin of 76.5%, and -4.13pcts year on year.
In 2023, the price of the company's iron concentrate tons without tax was 630 yuan, +16.8% year on year, gross profit of 319 yuan per ton, +7.8% year on year, gross profit margin of 50.63%, -4.24pcts year on year. According to Baichuan Yingfu data, since the beginning of 2024, titanium concentrate has risen slightly. The average prices of 2024Q1 and 2024Q2 titanium concentrate (TiO2 ≥ 47%) are 2,365 and 2,416 yuan/ton, respectively, up 0.76% and 2.91% from 2023Q4, respectively. The price of titanium concentrate has increased or contributed to some increase in the company's performance.
Looking ahead, we believe that the global supply and demand pattern for titanium concentrate is tight, and titanium concentrate prices are expected to remain high. At the same time, along with the attention paid to vanadium elements in vanadium-titanium-iron concentrate and the increase in demand for vanadium extraction, demand for vanadium-titanium-iron concentrate is also expected to be strongly supported, and profits may also be repaired.
The company has rich resource reserves, and the titanium project is expected to open up long-term growth space. According to the company's announcement, the company held about 253 million tons of ore by the end of 2023, of which: (1) the amount of industrial-grade iron ore resources held within the company's mining rights was about 185 million tons, TFE grade 29.46%, the amount of associated TiO2 was about 22.28 million tons, and the amount of associated V2O5 was about 500,000 tons, and V2O5 grade 0.27%.
(2) Holds 68.06 million tons of low-grade iron ore. Relying on abundant resources, the company actively extends the industrial chain and continues to promote the entire industry chain project with an annual output of 60,000 tons of energy-grade titanium (alloy) materials, which is expected to open up room for long-term growth.
Risk warning: downstream demand falls short of expectations, product prices have dropped sharply, and the project commissioning process falls short of expectations, etc.