Lb Group Co.Ltd(002601) (002601)
Event: on December 7, 2021, the company issued the performance forecast for 2021. In 2021, the company expects to realize a net profit attributable to the parent company of RMB 4.577-5.721 billion, with a year-on-year increase of 100% – 150%.
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The prosperity of titanium dioxide continued, and the production of chlorination project boosted the performance: in 2021, the downstream demand of titanium dioxide gradually recovered, the capacity expansion of sulfuric acid method at the supply end was limited, and titanium dioxide remained prosperous throughout the year under the mismatch of supply and demand. The mainstream price of rutile titanium dioxide in Central China increased from 16000 yuan / ton on January 1, 2021 to 20000 yuan / ton on December 8. As of December 8, the annual average price was 19395 yuan / ton, a year-on-year increase of 36.9%. The capacity of the 200000 ton chlorination phase II project of Jiaozuo base put into operation in 2020 continued to release, the utilization rate of the existing titanium dioxide capacity increased, and the volume and price increased, boosting the performance.
The price of raw and auxiliary materials increased, and the advantages of the integrated industrial chain thickened profits: in 2021, the price of raw and auxiliary materials in the upstream of titanium dioxide increased greatly. As of October 2021, the annual average import price of China’s titanium concentrate was US $309.52/t, a year-on-year increase of 46.6%. However, the company’s competitive advantage in the whole industrial chain of vertical integration has fully emerged. The company has its own capacity of titanium ore and titanium chloride slag, forming a whole industry chain pattern from titanium ore mining and beneficiation to the processing of raw materials such as high titanium slag and rutile, and then to titanium dioxide by sulfuric acid method, titanium dioxide by chlorination method, sponge titanium and other products; In 2021, the production capacity of 500000 tons of titanium chloride slag in Panxi was put into operation, further ensuring the supply of titanium dioxide raw materials for chlorination process, effectively avoiding the price risk of raw materials, and promoting the significant growth of the company’s net profit.
Layout of new energy materials with promising growth space: the company uses ferrous sulfate, a by-product of titanium dioxide produced by sulfuric acid process, as an iron source to strengthen the strategic layout of battery materials. On December 1, 2021, the company signed an investment contract with Nanzhang county government of Xiangyang City to invest in the construction of a battery grade lithium iron phosphate project with an annual output of 150000 tons. At present, the capacity of new energy material projects under construction of the company includes 100000 tons of iron phosphate and 150000 tons of lithium iron phosphate projects in Xiangyang base, 200000 tons of lithium iron phosphate projects in Qinyang base, 100000 tons of battery cathode and 200000 tons of iron phosphate projects in Jiaozuo base. The demand for new energy batteries has broad prospects. The company actively integrates into the production and manufacturing supply chain of new energy materials and will fully enjoy the development dividend of the new energy industry.
Profit forecast, valuation and rating: the company’s net profit in 2021 is in line with expectations. We maintain the company’s profit forecast from 2021 to 2023. It is estimated that the company’s net profit attributable to the parent company from 2021 to 2023 will be RMB 4.918 billion, RMB 5.429 billion and RMB 6.029 billion respectively. The company has the technical advantages of chlorinated titanium dioxide and the integration advantages of the whole titanium dioxide industry chain. It has deeply arranged new energy material projects, has broad growth space, and maintains the “buy” rating of the company.
Risk tip: the demand for titanium dioxide is less than expected, and the supply and demand pattern of new energy materials is at risk of deterioration
