The company is the first stock in China's titanium industry, leading in production scale. The company's main business is R&D, production and sales of titanium alloys. The products are widely used in high-precision fields such as aviation, aerospace, and ships, as well as important fields of the national economy such as chlor-alkali chemicals, electricity, metallurgy, medicine and marine engineering. The company's annual output of titanium products exceeds 30,000 tons, ranking first in the domestic titanium industry. Benefiting from the continued increase in demand for titanium in the military and civilian fields, the company's performance grew steadily. The compound annual growth rate of the company's revenue in 2018-2022 was 18.11%; the compound annual growth rate of net profit to mother was 40.98%. In the first three quarters of 2023, the company achieved operating income of 5.611 billion yuan, a year-on-year increase of 10.05%; achieved net profit of 549 million yuan, an increase of 6.89% over the previous year, and achieved steady overall growth.
The company's titanium product spectrum is perfect, and it has a clear competitive advantage. (1) The company is the largest titanium and titanium alloy production and research base in China. It has an internationally advanced and complete titanium production system. Its products include titanium alloy plates, strips, foils, tubes, bars, wires, forgings, castings and other processed materials and various metal composite products. (2) The company's products cover titanium sponge - billets - titanium ingots - titanium. The holding subsidiary Baotai Huashen has the production capacity of titanium sponge, the core raw material of titanium, which can effectively avoid the risk of fluctuations in raw material prices. (3) In terms of revenue scale, the company's titanium alloy business revenue is significantly higher than that of comparable companies Western Superconductivity (titanium alloy and superconducting business) and Western Materials (titanium products business). Judging from the production volume and sales volume, the company's production capacity and sales scale are also ahead of comparable companies. In 2022, the company's titanium alloy production and sales volume were above 30,000 tons.
Downstream demand for titanium alloy is strong, and it has broad application prospects in the military and civilian fields. (1) In the military field, titanium alloy is one of the main structural materials for military aircraft and engines. Advanced domestic military aircraft, represented by the “20 Series”, have entered the mass production and installation stage, which is expected to generate a large demand for titanium alloy; the use of titanium alloy in missiles can significantly improve the flight performance of missiles, and will also be more and more widely used in land-based weapons and equipment such as tanks and artillery; titanium alloy is an ideal material for ships and underwater equipment. It can improve the pressure resistance of equipment. The company has a pioneering advantage in the field of titanium materials for underwater equipment, leading R&D capabilities, and is expected to fully benefit from the future Amount of equipment released. (2) In the field of civil aviation, the company is a strategic partner of companies such as Boeing and Airbus. Currently, the amount of titanium used in major commercial airliner models is gradually increasing, and demand for civil aviation shipping is growing rapidly. According to the “COMAC Market Forecast Annual Report”, the number of passenger aircraft in China is expected to reach 1,0007, and the number of civil aviation aircraft delivered within the next 20 years will reach 9284, accounting for 21.8% of the world's new aircraft deliveries.
Investment advice: We adjusted the profit forecast according to the company's latest situation. We forecast that the company's revenue for 2023-2025 will be 71.81/101.45/12.78 billion yuan, respectively, net profit to mother of 7.18/10.85/1,467 billion yuan, corresponding EPS 1.5/2.27/3.07 yuan, corresponding to PE 17.1/11.32/8.37X, maintaining a “buy” rating.
Risk warning: Production expansion falls short of expectations, orders fall short of expectations, profit forecasts and valuations fall short of expectations