Incidents:

On August 19, 2024, Anning Co., Ltd. released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 0.846 billion yuan, a year-on-year increase of 0.07%; achieved net profit attributable to shareholders of listed companies of 0.438 billion yuan, a year-on-year decrease of 1.26%; and a weighted average return on net assets was 7.08%, down 0.83 percentage points from the previous year. The gross profit margin on sales was 67.92%, up 2.14 percentage points from the previous year; the net profit margin was 51.85%, down 0.70 percentage points from the previous year.

Among them, in 2024Q2, the company achieved revenue of 0.4 billion yuan, +0.13% year over month, -10.15% month on month; realized net profit of 0.208 billion yuan, -2.01% year on year, -9.57% month on month; ROE was 3.34%, down 0.38 percentage points year on year and 0.42 percentage points month on month. The gross profit margin on sales was 69.33%, up 3.28 percentage points year on year and 2.67 percentage points month on month; net sales margin was 52.02%, down 1.14 percentage points year on year, and up 0.32 percentage points month on month.

Investment highlights:

The titanium concentrate boom remained high, with steady performance in the first half of 2024

In the first half of 2024, the company achieved net profit of 0.438 billion yuan, a year-on-year decrease of 1.26%.

According to the China Ferroalloy website, China's titanium ore production in 2023 was 6.78 million tons, of which Panxi region accounted for 82%. The main mining areas of the top 4 companies with the largest production capacity, Pangang Group, Longbai Group, Anning Co., Ltd., and Xichang Mining are all located in the Panxi region. The four leading companies account for more than 60% of the country's total output. In the first half of 2024, the average unit price of titanium concentrate was 2,085 yuan/ton, up 3.51% year on year; the average unit price of iron ore was 880 yuan/ton, up 7.38% year on year. By sector, the company's titanium concentrate products achieved operating income of 0.528 billion yuan, a year-on-year decrease of 3.45% and a gross profit margin of 74.74%, a year-on-year decrease of 2.35 percentage points; vanadium-titanium-iron concentrate products achieved operating income of 0.314 billion yuan, an increase of 7.51% over the previous year, and a gross profit margin of 56.38%, an increase of 11.01 percentage points over the previous year. In terms of period expenses, the company's sales/management/ R&D/ finance expense ratios for the first half of 2024 were

0.13%/5.59%/3.55%/-1.75%, -0.01/+0.64/+0.35/+1.63pct year over year. Financial expenses were mainly due to lower deposit interest rates and additional interest on short-term loans. In the first half of 2024, net cash flow from the company's operating activities was $0.476 billion, a year-on-year decrease of 2.08%.

The price of titanium concentrate increased month-on-month, and I am optimistic about 2024Q3 performance growth

With 2024Q2, the company achieved net profit of 0.208 billion yuan, -0.004 billion yuan year-on-year, and -9.57% month-on-month; of these, gross profit was 0.277 billion yuan, +0.013 billion yuan year-on-year, and -0.019 billion yuan month-on-month. The increase in the company's revenue and gross profit is mainly due to good overall titanium concentrate production and sales. According to Wind, the average price of 2024Q2 titanium concentrate was 2,094 yuan/ton, +3.75% year over month, and +0.86% month on month; the average price of iron ore was 848 yuan/ton, +11.33% year on month, -6.99% month on month. In terms of period expenses, 2024Q2's sales/management/R&D/finance expenses were 0.01/0.025/0.014/-0.013 billion yuan, respectively, +0.00/+0.01/+0.02/+0.007 billion yuan year-on-year, and +0.003 billion yuan compared to the previous month.

According to Wind, since the third quarter of 2024 (as of August 19, 2024), the price of titanium concentrate was 2,109 yuan/ton, +6.25% year-on-year, +1.54% month-on-month; the price of iron ore was 784 yuan/ton, -2.91% year-on-year and -7.54% month-on-month. Titanium concentrate prices are maintained, and we are optimistic about the company's third quarter results.

The dividend payment rate for the mid-year 2024 dividend was 45.62%. Continue to monitor investor returns. On August 20, 2024, the company announced the 2024 semi-annual profit distribution plan. The net profit attributable to shareholders of the listed company in the company's 2024 consolidated statement from January to June 2024 was 0.438 billion yuan, and the net profit realized by the parent company was 0.398 billion yuan, not counting the statutory surplus reserve fund. As of June 30, 2024, the consolidated statement's cumulative undistributed profit was $0.449 billion, and the parent company's cumulative undistributed profit was $0.408 billion. In order to actively return shareholders and share the operating results of the company's development with shareholders, based on the company's actual situation, the company plans to distribute a cash dividend of RMB 5.00 billion (tax included) to all shareholders for every 10 shares based on the total share capital of 0.401 billion shares after excluding 0.9138 million shares from the special securities account. In total, a cash dividend of 0.2 billion yuan will be distributed. No bonus shares will be transferred. The dividend payment rate will reach 45.62%.

Profit forecasts and investment ratings

The company's revenue for 2024-2026 is estimated to be 1.9, 2.11, and 2.92 billion yuan, respectively, and realized net profit of 0.958, 1, and 1.215 billion yuan respectively, corresponding to PE 10.3, 9.9, and 8.1 times, respectively. The company is an important domestic titanium concentrate supplier and leading enterprise. Multiple projects are progressing in an orderly manner, optimistic about the company's growth, and maintaining a “buy” rating.

Risk warning

Risk of macroeconomic fluctuations; production capacity investment falling short of expectations; risk of product price fluctuations; risk of fluctuations in raw material prices; decline in future demand; progress of new projects falling short of expectations.