Baoji Titanium Industry Co.Ltd(600456) (600456)
It is a prosperous track for aviation and aerospace development, with a significant leading position in the industry. As the leader of China's military titanium alloy, the company has a layout in aviation, aerospace and aviation directions. It is expected that the demand side will be more deterministic in 2022. Among them: 1) aviation, the company's titanium alloy bars are mainly used to produce cold end components such as engine blades and protective plates, occupying a dominant market position at the supply side, The incremental demand brought by Taihang series and its modification shows rapid growth, which is the main source of military products revenue at present; 2) Titanium alloy plate of aerospace company is mainly used in liquid fuel engine combustion chamber, rocket engine shell and other directions. Considering the gradual batch production and accelerated loading of aviation and aerospace multi-type key weapons and equipment, it is expected to further drive the company's military business to accelerate the upward trend.
Structural optimization combined with technological transformation and production expansion is expected to boost profit elasticity. In 2020, the actual titanium processing capacity of the company reached 22700 tons, 13.57% higher than the design capacity, which is mainly divided into three directions: military, civil and foreign trade. Considering the impact of the epidemic, the recovery of foreign trade demand is relatively slow, and the overall production capacity of the company has a certain room for optimization. In addition, the company can also help continuously improve the production capacity through technical transformation. It is expected that with the optimization of the company's production capacity structure and the implementation of relevant technical transformation and raised investment projects, it will further drive the upward elasticity of the company's comprehensive profit margin.
The self supply capacity of sponge titanium is enhanced, which is expected to continue to thicken the company's performance. Titanium processing materials are formed after remelting and pressure processing of sponge titanium. According to the announcement of dingzeng, the output of sponge titanium of the company's subsidiary BaoTi Huashen (holding 66.7%) in 2017-2019 was 8765 tons, 9189 tons and 9133 tons respectively, of which 50% of the products are used for external sales, and the rest is to ensure the supply of raw materials within the company. According to the semi annual report, The project progress of "12000 ton sponge titanium production expansion project" has reached 59.6%. It is expected that after the new production capacity is reached, while further improving the company's self supply capacity of sponge titanium, it can also hedge the price rise pressure of upstream sponge titanium and stabilize the company's profitability.
Investment suggestion: as a leading enterprise of Chinese military titanium alloy, the company will continue to benefit from the high demand growth brought by the two boom tracks of aviation and aerospace. With the promotion of the company's technological transformation and the gradual production of new production capacity, it is expected to boost the company's performance. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 722 million, RMB 1082 million and RMB 1440 million respectively, with corresponding valuations of 45, 30 and 23 times respectively. It will be covered for the first time and given a "Buy-A" rating.
Risk tip: military orders are less than expected.
