Introduction to this report:

Exports of the titanium dioxide industry increased slightly month-on-month in August. Domestic apparent demand increased by more than 5% month-on-month. The company's resource and cost advantages were obvious, and it maintained an increase in holdings rating.

Key points of investment:

Maintain an “Overweight” rating. Maintain an EPS of 1.46/1.88/2.36 yuan for 24-26 years. Refer to comparable companies, maintain the target price of 20.75 yuan (corresponding to 14.17 XPE in '24) and maintain the “gain” rating.

Titanium dioxide exports increased steadily in August. Among them, exports to the EU picked up after anti-dumping measures fell to an extreme value in July. According to customs data, (1) in terms of export volume, export volume in August 2024 was 0.1607 million tons, +16.88%, month-on-month; January-August export volume was 1.2934 million tons, +16.55% year on year; (2) judging from the average export price, the average export price of China's titanium dioxide in August 2024 was about 2,161 US dollars/ton, +1.39% year on month; (3) from January to August, the average export price was 2,239 US dollars/ton, +2.52% year on year; (3) from titanium dioxide Looking at the export structure, in July, due to EU anti-dumping, the proportion of titanium dioxide exported to the EU plummeted to 4% (16% for 24H1). In August, with the gradual digestion of EU export preparations in the first half of the year and the determination of export-related business strategies by related companies after anti-dumping was implemented, exports to the EU rebounded strongly to 11%, and exports to the EU increased 163.40% month-on-month, but the average monthly export volume fell 32% from H1. In addition, India, Brazil, and the Eurasian Economic Union accounted for 18.6%, 8.8%, and 4.0% of exports in August; (4) for titanium ore, 0.65 million tons were imported in August (+31% YoY, +35% YoY), and the unit import price was 2020 yuan/ton (-5% YoY, -11% YoY); 3.32 million tons (YoY +9%) were imported in January-August, and the unit import price was 2,117 yuan/ton (-16% YoY).

The operating rate of the industry has increased, and domestic demand is also growing strongly. (1) Supply side: According to Baichuan Yingfu, the operating rate of China's titanium dioxide industry in August was about 80.96%, +4.38pct month-on-month; the output in August was 0.3972 million tons, +14.76% year-on-year and +4.39% month-on-month. (2) Demand side: In terms of domestic demand, the apparent consumption of titanium dioxide in August '24 was about 0.243 million tons, +11.53% year-on-year and +5.65% month-on-month. The downstream of titanium dioxide terminals is mainly in the fields of coatings and papermaking. We believe that with the implementation of real estate policies and related stimulus policies, domestic demand may continue to improve over time.

Resources are king, and low-cost leaders continue to grow. The company has the highest production capacity of titanium dioxide in the world, and also supports an annual production capacity of more than one million tons of titanium concentrate, with remarkable cost advantages. In terms of resources, the company's Fengyuan technical improvement project, the Hongge mining area integration project, and the Xujiagou development project continue to advance. The company also recently announced that it will compete for the right to survey and prospecting for Changchong titanium ore in Wuding County, Yunnan Province. At the same time, the company also has multiple locations in terms of mineral rights/priority procurement rights at home and abroad.

Risk warning: Projects under construction fell short of expectations, and anti-dumping in Brazil and India exceeded expectations.