Net profit of 544 million yuan was achieved in 23 years, maintaining that the “buy” rating company achieved revenue of 6.927 billion yuan (yoy +4.4%) and net profit of 544 million yuan (yoy -2.3%); 23Q4 achieved revenue of 1,316 billion yuan (yoy -14.3%, qoq -30.8%), and net profit to mother of 0.05 billion yuan (yoy -112.0%, qoq -103.1%). We lowered the 24-25 production and sales volume and gross margin assumptions based on the company's operating results of titanium products in '23, and considering the company's expense control. The company's 24-26 EPS is estimated to be 1.46/1.81/1.86 yuan (previous value: 1.80/2.13/- yuan), and a comparable average PE (2024E) value is 22X, giving the company a 24-year 22XPE, corresponding to a target price of 32.12 yuan (previous value 37.91 yuan), maintaining the “buy” rating.
Decrease in gross margin+increase in the period expense ratio, putting pressure on 23Q4 results
The company's production and sales volume of titanium products in '23 was 3.00 and 29,400 tons, respectively, and gross profit per ton rose slightly by 50,000 yuan/ton to 46,700 yuan/ton. However, due to a slight increase in the price of a single ton, gross margin remained flat at 21.8% year on year; production and sales of other metal products were 1006 and 962 tons, respectively, +37.19% and +29.41% year-on-year. The gross margin decreased by 3.29 pct to 14.85% year on year. The cost rate for the period increased slightly by 0.13pct year-on-year to 9.12%. The company's 23Q4 performance was under pressure. In addition to a sharp drop in gross margin (15.63%, -6.60pct month-on-month), it was also due to a significant increase in expenses during the period. Among them, the sales expense ratio, management cost ratio, and R&D cost ratio increased by 1.04 pct, 3.03 pct, and 4.35 pct, respectively, to 1.71%, 6.16%, and 7.68%, respectively.
Titanium alloy faucet, actively expanding production
The company is mainly engaged in the production, processing and sales of titanium and titanium alloys, and is the largest titanium and titanium alloy production and research base in China. The company has an international advanced and complete titanium production system. The main products are processing materials such as titanium and titanium alloy plates, strips, foils, tubes, bars, wires, forgings, castings, etc. of various specifications and various metal composite products. Fund-raising projects in '21 include high-quality titanium ingots, pipes, and profile production line construction projects and aerospace grade wide-width titanium alloy sheets and foil construction projects. After completion and delivery of the first project, it is expected to add a total production capacity of 10,000 tons of titanium and titanium alloy ingots, 290 tons of titanium alloy pipes, and 100 tons of titanium alloy profiles every year. After delivery, the second project is expected to add 1,500 tons/year of sheet production capacity, 5,000 tons/year of strip production capacity, and 500 tons/year of foil production capacity.
It plans to produce 40,000 tons of titanium products in 24, achieving revenue of 7.5 billion yuan. In 2024, the company's business goals are: achieve operating income of 7.5 billion yuan, cost and expense plan of 6.8 billion yuan, production of titanium products of 40,000 tons, and fixed asset investment plan of 231 million yuan. The total capital required by the company in 2024 for the purchase of raw and auxiliary materials, construction of capital raising projects, self-construction projects for technical improvement and technical measures, payment of labor costs, cash dividends, and repayment of bank loans is estimated to be 7 billion yuan.
Risk warning: Industry competition increases risk; lower prices, production and sales due to lower market demand than expected; risk of fluctuations in raw material prices.