Description of the event
On the evening of April 23, 2024, Longbai Group released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 26.794 billion yuan, an increase of 10.93% over the previous year; net profit to mother was 3,226 billion yuan, a decrease of 5.64% year on year. Among them, 2024Q1 achieved revenue of 7.294 billion yuan, a year-on-year increase of 4.54%, a month-on-month increase of 12.03%, and realized net profit of 951 million yuan, an increase of 64.15% year-on-year, a year-on-month decrease of 12.27%, gross sales margin of 28.29%, and an improvement of +0.75pct month-on-month.
Production and sales of titanium dioxide increased, and prices bottomed out. The company's performance gradually recovered in 2023. The prosperity of the titanium dioxide industry gradually recovered from the bottom, and prices rebounded. The company effectively increased the capacity utilization rate of titanium dioxide and titanium sponge, and the production and sales volume of titanium dioxide and titanium sponge increased significantly. According to Baichuan data, the average price of 2023Q4 and 2024Q1 titanium dioxide was 16361.69 and 16063.75 yuan/ton, respectively, with year-on-month changes of +4.40% and -1.82%, respectively. In 2023, the company produced 1.1914 million tons of titanium dioxide, up 20.36% year on year, including 804 million tons of sulfuric acid titanium dioxide, up 18.18% year on year, and 387,400 tons of chlorinated titanium dioxide, up 25.18% year on year; a total of 1.1589 million tons of titanium dioxide were sold, up 24.93% year on year, with domestic sales accounting for 43.53% and international sales accounting for 56.47%. In 2023, 51,800 tons of titanium sponge were produced, up 36.05% year on year, and 47,000 tons of titanium sponge were sold, up 28.15% year on year.
In 2023, 4.2408 million tons of iron concentrate were produced, up 16.63% year on year. Sales of iron concentrate were 4.3382 million tons, a year-on-year decrease of 0.65%; production of titanium concentrate was 1.474,500 tons, up 26.14% year on year. All internal use effectively guaranteed the company's raw material supply.
Export sentiment has increased, and new production capacity has continued to advance, helping growth space. Overseas titanium dioxide manufacturers have gradually lost their advantage in competitiveness under cost and environmental pressure. Domestic titanium dioxide companies have both improved their technology and production capacity, and export volume has increased year by year. In 2023, the domestic export volume of titanium dioxide was 16.42 million tons, an increase of 16.75% over the previous year. In 2024.03, the export volume of titanium dioxide reached 196,000 tons, up 29.64% year on year and 46.76% month on month. The export price was 2264.64 US dollars/ton, up 63.29 US dollars/ton from February, further improving export sentiment. In terms of new production capacity, Longbai Mining and Metallurgy Company's 200,000 tons/year chlorinated titanium dioxide construction project is currently in the EIA approval stage. The second phase (15,000 tons) of Yunnan Guotai's 30,000 tons/year rotor-grade sponge titanium intelligent manufacturing technology improvement project is undergoing equipment debugging; Gansu Guotai 30,000 tons/year rotor-grade sponge titanium technology upgrading and transformation project phase II (15,000 tons) is undergoing equipment testing. The third phase (100,000 tons) of the battery material-grade iron phosphate project with an annual output of 200,000 tons is under construction. The company's integrated layout will further consolidate the position and advantages of the titanium industry.
Investment advice
The cost advantage of the company's vertically integrated titanium industry chain is remarkable. Accelerating the deployment of high-end titanium sponge and lithium battery new energy materials projects will bring the company a second growth space. The current boom in the titanium dioxide industry is improving. The company's net profit for 2024-2026 is estimated to be 39.02, 44.90, and 5.315 billion yuan respectively (the previous value of 2024-2025 was 35.90 billion yuan and 4.323 billion yuan, respectively), with year-on-year growth rates of 21.0%, 15.0% and 18.4%. The current stock price corresponding to PE is 13, 12, and 10 times, respectively. Maintain a “buy” rating.
Risk warning
(1) The risk that project construction progress falls short of expectations;
(2) The risk that project approval progress falls short of expectations;
(3) The risk of large fluctuations in raw material prices;
(4) The risk of a sharp drop in product prices.