Description of the event
In 2023, the company achieved revenue of 26.79 billion yuan (+10.9% YoY), realized attributable net profit of 3.23 billion yuan (-5.6% YoY), and realized attributable deducted non-net profit of 3.12 billion yuan (-4.7% YoY). Among them, Q4 achieved revenue of 6.51 billion yuan in a single quarter (+6.9% YoY, -7.3% YoY), realized vested net profit of 1.08 billion yuan (+340.6% YoY, +23.2% YoY), and realized non-net profit of 1.06 billion yuan (+526.2% YoY, +23.1% YoY). With 2024Q1, the company achieved revenue of 7.29 billion yuan (+4.5% YoY), realized net profit of 950 million yuan (+64.1% YoY), and realized non-net profit of 920 million yuan (+67.2% YoY). The controlling shareholder of the company proposed the 2024Q1 profit distribution plan: cash dividend of 6 yuan (tax included) will be distributed to all shareholders for every 10 shares based on the company's total share capital as of March 31, 2024.
Incident comments
The titanium dioxide boom is booming, and the company continues to push for upstream and downstream production expansion. Since 2023, the price spread of titanium dioxide has been repaired, driven by the steady recovery of demand in other fields and driven by export demand, driven by real estate guarantees and delivery.
The average price/price difference of 2023Q1 was 1.54/0.72 million yuan/ton (-23.4%/-24.8%), the average price/price difference of 2023Q2 was 1.59/0.79 million yuan/ton (-17.7%/+13.6% YoY), the average price/price difference of 2023Q3 was 1.57/0.76 million yuan/ton (-4.9%/+12.0%), and 2023Q4 average price/price difference was 1.64/0.8 million yuan/ton (YoY +9.1%/+23.0%), The average price/price difference of 2024Q1 was 1.60/0.76 million yuan/ton (+3.7%/+4.5%), and the average price/price difference of 2024Q2 (as of 2024.4.21) was 1.65/0.79 million yuan/ton (+4.0%/-0.5% year over year). Driven by the “Golden Three Silver Four” peak season and export demand, the profits of the titanium dioxide market were relatively strong, compounded by the increase in titanium concentrate prices, and the volume of new production capacity jointly drove performance improvement. The company has “titanium ore-titanium dioxide-titanium sponge titanium” integration, actively lays out the upstream titanium ore chain, and shows that it has revitalized the mining industry and doubled the amount of vanadium-titanium-magnetite resources. Image, a participating company of the participating company Dongfang Zirconium, signed an agreement with Sheffield Resources Co., Ltd. to acquire McCall's ore project to develop raw materials for titanium concentrate to effectively guarantee the supply of raw materials.
The gross margin of 2024Q1 was generally stable month-on-month, and the cost ratio increased month-on-month. 2024Q1, due to the price difference of titanium dioxide and the relatively stable price of titanium concentrate, the company's gross profit margin was 28.3%, up 0.7 pct month-on-month, net interest rate 12.9%, down 2.8 pct month-on-month, and the cost ratio for the period was 10.9%, up 5.5 pct month-on-month, and fluctuated between quarters. The company has significant technical advantages in improving the quality and deep processing of titanium raw materials, developing new titanium dioxide products and optimizing product performance, process coupling and clean production of titanium and derivatives, comprehensive utilization of waste resources, improved atomic utilization, production process management and control, and improvement and localization of chlorination equipment.
The expansion of the titanium sponge market has brought huge room for development. Since 2023, due to weak terminal demand, the market price of titanium sponge has continued to decline and operate steadily, reaching 53,000 yuan/ton recently. It is expected that the consumption of chemical, aerospace and marine engineering in the field of titanium sponge terminals will continue to rise rapidly in 2020-2025, and supply-side structural reforms in the superposition industry will continue to deepen, and the profit of sponge titanium is expected to improve. The company's current titanium sponge production capacity has reached 50,000 tons/year, and an additional production capacity of 30,000 tons/year is undergoing equipment debugging.
The new energy sector is under pressure, refining its advantages to seek growth. Since the beginning of 2023, the growth rate of demand for terminal lithium batteries has slowed, compounded by the continuous investment of iron phospate/lithium iron phosphate production capacity, and product prices have declined. The 2024Q2 iron phosphate price/price difference changed -19.9%/-30.9% year on year, and the month-on-month decline narrowed markedly. Currently, the company has a production capacity of 100,000 tons/year of iron phosphate, 50,000 tons/year of lithium iron phosphate, and 75,000 tons/year of graphite anode/graphitization. The company continues to expand its planning advantages, and relies on the integration of the titanium-lithium industry chain to continuously strengthen its cost advantage.
The company is a global leader in titanium dioxide integration and lays out new energy sources to open up growth boundaries. The company's net profit for 2024-2026 is estimated to be 40.9 billion yuan, 55.6 billion yuan, and 6.56 billion yuan, respectively, maintaining a “buy” rating.
Risk warning
1. The recovery in downstream demand fell short of expectations;
2. The progress of the new project is lower than expected.