Report guide

On April 24, Longbai Group released its 2023 annual report and 2024 quarterly report. In 2023, it achieved total operating income of 26.794 billion yuan, up 10.92% year on year; realized net profit of 3.116 billion yuan, down 4.68% year on year; of these, Q4 achieved revenue of 6.511 billion yuan in a single quarter, up 6.89% year on year, down 7.28% month on month; realized net profit of 1,059 billion yuan, up 526.18% year on year and 23.00% month on month. 2024Q1 achieved total revenue of 7.294 billion yuan, up 4.54% year on year and 12.03% month on month; realized net profit after deduction of 925 million yuan, up 67.21% year on year and 12.65% month on month.

Key points of investment

The prosperity of the titanium dioxide industry improved. The company performed well in 23Q4, and the company's net profit maintained a quarterly growth trend during the year, mainly due to a gradual improvement in the bottom of product prices. The company's titanium concentrate production increased dramatically, and the 23Q4 single quarter performance increased significantly. The price of titanium dioxide gradually rose in the whole of 2023. The average price of titanium dioxide increased significantly in 23Q4, but the average price for the whole year declined; according to Baichuan Yingfu data, the average price of titanium dioxide for the full year of 2023 was 15754.62 yuan/ton, down 10.91% year on year; the average price of titanium dioxide in 2023Q4 was 16,361.69 yuan/ton, up 8.36% year on year, up 4.40% month on month; as of April 23 2024Q1 The average price of titanium dioxide in Japan was 16,554 yuan/ton, up 5.39% from this year's low, and industry sentiment improved; at the same time, the industry's export volume increased significantly. According to customs statistics, the export volume of titanium dioxide in 2023 was 1,641,700 tons, up 16.79% year on year; 2023Q4 titanium dioxide export volume was 3871,000 tons, up 16.16% year on year, down 7.47% month on month. The export volume of 2024Q1 titanium dioxide was 489,500 tons, up 11.98% year on year and 26.47% month on month. Increased exports combined with a partial recovery in domestic demand. Titanium dioxide prices have risen, and the company's 24Q1 performance improved markedly.

Meanwhile, the price of titanium concentrate continued to increase in 2024. According to Baichuan Yingfu data, the average price of titanium concentrate in 2024 Q1 was 2076.62 yuan/ton, up 3.12% year on year and 2.83% month on month; as of April 23, the average price of titanium concentrate in China was 2,113 yuan/ton, up 4.97% from this year's low. In the future, due to the continuous increase in titanium dioxide production, there is no new supply of titanium concentrate in the short term, and the price of titanium concentrate is expected to continue to grow.

The company provides its own mineral resources to guarantee the supply of raw materials and defend costs. With its scale advantages and cost advantages, Longbai Group has maintained a leading position in the titanium industry. It has developed a production capacity of 1.51 million tons/year of titanium dioxide and 50,000 tons/year of titanium sponge. Under the current pattern of continuous tight supply and demand for titanium ore, the company adheres to the strategy of owning its own ore sources and defends the cost advantage. In 2023, the company's own mines produced more than 1.47 million tons of titanium concentrate. At the same time, the company is actively developing and utilizing the Hongge mine and Miaozigou mine to lay out upstream titanium ore resources.

Currently, the price of titanium dioxide is low, and the profit pressure on the industry is high. The company has its own titanium concentrate, which has a cost advantage and is expected to maintain profits in a low boom.

China's housing completion area is showing signs of improvement, which is expected to drive demand for titanium dioxide. According to data from the National Bureau of Statistics, China's housing completion area in 2023 was 998.31 million square meters, up 15.78% year on year; 2023Q4 China's housing completion area was 51.26 million square meters, up 12.75% year on year, up 245.43% month on month; in 2024, with the introduction of “insurance and construction” projects, the real estate completion side will be boosted from restoration to stabilization; in the future, with the implementation and implementation of relevant policy projects, demand for titanium dioxide is expected to increase, drive The price of titanium dioxide continues to rise.

The unique horizontally coupled green economy model opens up new space for performance growth. The company actively caters to the country's “double carbon” strategy, further improves the green “big chemical” industry portfolio, and plans products in the fields of new energy materials, rare metals, and intelligent manufacturing. The company has carried out a new plan for vanadium pentoxide. At present, it has built an 800 tons/year waste acid vanadium extraction production line and has met production standards to achieve foreign sales. During the “14th Five-Year Plan” period, the company will strengthen the construction of its own “granary”, promote the construction of new mining projects such as the integration of the two mines in the Hongge mining area and Xujiagou development, and strive to achieve an annual production of 7.6 million tons of iron concentrate and 2.84 million tons of titanium concentrate by the end of the “14th Five-Year Plan”. The company expects the overall self-sufficiency rate of titanium ore to reach about 70%.

Profit forecasting

Due to the weakening of the titanium dioxide industry, the company's profit forecast was lowered; revenue for 2024-2026 is expected to be 307.89/344.10/36.030 billion yuan, respectively, and 2024-2026 net profit is 35.13/39.27/50.33 billion yuan, respectively, corresponding EPS is 1.47/1.65/2.11 yuan/share, and PE is 13.96/12.49/9.74 times, respectively. Due to the expansion of the company's production capacity such as titanium concentrate, profits are expected to grow and maintain the “buy” rating.

Risk warning

Construction of new projects fell short of expectations, the real estate boom continued to be sluggish, policy changes, etc.