\u3000\u3000 Baoji Titanium Industry Co.Ltd(600456) (600456)
Events
The company issued the performance increase forecast for 2021, and it is expected to realize the net profit attributable to the parent company of about 550 million yuan to 580 million yuan in the whole year, with a year-on-year increase of 51.66% to 59.93%; The net profit deducted from non parent company was about 490 million yuan to 520 million yuan, with a year-on-year increase of 53.72% to 63.13%.
Brief comment
The annual performance increased significantly, and the upward price of sponge titanium dragged down the performance in the fourth quarter
In 2021, the company expects to realize a net profit attributable to the parent company of about 550-580 million yuan, with a year-on-year increase of 51.66-59.93%; The net profit deducted from non parent company was about 490-520 million yuan, with a year-on-year increase of 53.72-63.13%. The company continued to explore the market, reform and innovation, and the sales revenue of main business products increased year-on-year, reflecting strong profitability.
It is estimated that 2021q4 company is expected to realize a net profit attributable to the parent company of about 79-109 million yuan, a year-on-year decrease of 10.16-34.94%; The net profit deducted from non parent company was about 52-82 million yuan, a year-on-year decrease of 14.65-45.78%. In 2021q4, the price increase of sponge titanium is much higher than that of titanium, resulting in a large increase in the production cost of titanium. We judge that this is the main reason for the poor performance of Q4 profit end of the company.
About 30% of the company’s sponge titanium is supplied by BaoTi Huashen. Holding BaoTi Huashen enables the company to ensure the stable supply of sponge titanium and the quality of raw materials. BaoTi Huashen’s sponge titanium output in 2020 was 8212 tons, accounting for 6.68% of the market, which still lags far behind the head manufacturers. In July 2021, BaoTi Huashen 12000t / a sponge titanium production line began to be put into operation and gradually released production capacity, which will help the company reduce the negative impact of raw material price rise in the future.
On behalf of China, based on the international market, China’s leading position is stable
The company is the largest production and scientific research base of titanium and titanium alloy in China, and the annual output of titanium materials, the leading product, ranks in the forefront of similar enterprises in the world; The company has strong R & D advantages. It has successfully implemented and completed a number of major national science and technology projects and marine engineering R & D and industrialization projects of the national development and Reform Commission. The manufacturing technology of titanium alloy manned spherical shell of 4500m submersible won the first prize of 2018 China Nonferrous Metals Industry Science and Technology Award; The “BaoTi BaoTi” and graphic trademarks registered by the company have won the title of well-known trademark in China, and have been registered in more than 30 countries and regions such as the United States, Britain, France and Italy. The “BaoTi” brand titanium and titanium alloy processing materials have become synonymous with “China Titanium” in the international market.
The market demand of titanium industry recovers slowly, and the main business segment may continue to grow
In 2021, the export market demand of titanium industry recovered slowly, and the overall market of China’s titanium industry improved. The middle and low-end product market benefited from the recovery of the chemical industry, and the demand increased significantly year-on-year; The high-end product market benefits from the upgrading and localization of aerospace and other fields, and the demand is strong; In the macro aspect, relying on the national “14th five year plan” development plan and the long-term goal outline of 2035, the titanium industry is supported by the state and local governments at all levels. In the future, the titanium industry will still have great market development opportunities in aviation, aerospace, new energy, new materials, domestic titanium, deep sea and other industries. In the first half of 2021, the company realized an operating revenue of 2.840 billion yuan, of which the net profit attributable to the shareholders of the listed company was 278 million yuan, and the sales volume of titanium products was 11712.06 tons (including 9094.62 tons of titanium materials).
The commercial production of C919 aircraft continued to advance, driving the growth of demand for high-end titanium alloy
C919 aircraft is China’s first single channel large trunk aircraft developed in full accordance with international advanced airworthiness standards, with China’s complete independent intellectual property rights. The maximum range is more than 5500 kilometers, and the performance is equivalent to that of the new generation of mainstream single channel passenger aircraft in the world. BaoTi group is the preferred supplier of titanium materials for C919 project and also a qualified supplier in China. In the future, the commercial mass production of C919 will put forward high demand for high-end titanium alloy, and the company will continue to benefit.
Profit forecast and investment rating: under the reform and innovation, the product structure is continuously optimized, covered for the first time, and rated as “overweight”
With the continuous optimization of the company’s product structure and the acceleration of the construction of raised investment projects, it is expected that by 2023, the market share of medium and high-end titanium will be increased, further consolidating the company’s leading position in China’s titanium industry and laying the foundation for rapid development in the next five to ten years. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 571 million, RMB 814 million and RMB 1029 million respectively, with a year-on-year increase of 57.38%, 42.60% and 26.41% respectively. The corresponding EPS from 21 to 23 will be RMB 1.19/1.70/2.15 respectively, and the corresponding PE of the current stock price will be 42 / 30 / 24 times respectively. It will be covered for the first time and rated as “increased holding”.
Risk tips
1. The production capacity is lower than expected
2. The price of raw materials continues to rise
