Introduction to this report:

The company's production and sales of titanium concentrate and iron concentrate products are stable, and the prices of the two major products are relatively strong. The company's titanium alloy project continues to advance, and it is expected that the titanium alloy project will bring growth to the company.

Key points of investment:

Maintain an “Overweight” rating. Considering that the company's titanium alloy project was delayed due to fixed increases, the company's net profit forecast for 2024-2025 was lowered to 1.018/1.053 billion yuan (originally 1.096/1.335 billion yuan), and the net profit forecast for 2026 was 1.209 billion yuan, corresponding to EPS of 2.54/2.63/3.02 yuan, respectively. Considering the decline in the valuation level of companies in the same industry, the company was given a valuation of 13 times PE in 2024, and the company's target price was lowered to 33.02 yuan (originally 37.19 yuan) to maintain the company's “gain” rating.

The supply and demand of titanium concentrate is tight, and the price is strong. Judging from the annual reports of major overseas titanium concentrate producers, the global supply of titanium concentrate declined in 2023. Among them, Rio Tinto produced 1.111 million tons of titanium concentrate in 2023, down 0.089 million tons; Kenmare produced 1.0915 million tons of titanium concentrate in 2023, down 0.1093 million tons year on year; Bass Resources produced 0.2975 million tons in 2023, down 0.0377 million tons year on year. Capital expenditure in the titanium concentrate industry is low, and global titanium concentrate growth is expected to be low in 2024. On the demand side of titanium concentrate, China's titanium dioxide production in 2023 was 4.2177 million tons, up 0.3206 million tons year on year, and sponge titanium production in 2023 was 0.2154 million tons, up 0.0384 million tons year on year. Under the influence of real estate, production of titanium dioxide is expected to be stable, while production of titanium sponge will gradually rise due to the rise in consumer electronics, chemical and other industries. The supply of titanium concentrate is tight, and prices are expected to continue to be strong.

Demand for steel is strong, and demand for iron ore is good. As new real estate starts have dropped drastically, real estate's share of steel demand has declined. Since 2024, the impact of real estate on steel demand has gradually weakened, and the supporting effect of special bonds on infrastructure is obvious. In addition, manufacturing and export demand on the steel demand side is good, demand in the steel industry is weak, and demand for iron ore is good.

The titanium alloy project continues to advance, and it is expected that it will gradually expand in the future. According to the company's announcement, the company's titanium alloy project plans to raise 4.943 billion yuan for the entire industry chain project with an annual output of 0.06 million tons of energy-grade titanium (alloy) materials. The final products of the project are titanium ingots, titanium powder, etc., which is an effective extension of the company's existing titanium concentrate industry. China's titanium consumption is increasing year by year. According to data from the Zirconium and Titanium Branch of the Nonferrous Metals Association, in 2023, China's titanium consumption was 0.148 million tons, an increase of 0.003 million tons over the previous year. Among them, the chemical and aerospace industries clearly supported titanium consumption. According to the company's announcement, the project is expected to complete construction in June 2025 and produce intermediate products one after another, and is expected to gradually expand after 2025.

Risk warning: The commissioning of new production capacity fell short of expectations; the price of titanium concentrate fell sharply.