\u3000\u3 China Vanke Co.Ltd(000002) 978 Sichuan Anning Iron And Titanium Co.Ltd(002978) )
Event: the company announced on April 1 that it plans to invest 10 billion yuan to build the whole industrial chain project of energy grade titanium (alloy) materials with an annual output of 60000 tons.
Comments:
Relying on the advantages of titanium resources, the company extends to the downstream of the industrial chain. The company signed the project investment contract with Panzhihua vanadium titanium high tech Industrial Development Zone, and plans to invest 10 billion yuan to build the whole industrial chain project of energy grade titanium (alloy) materials with an annual output of 60000 tons, including sponge titanium and supporting production lines, titanium (alloy) material ingot and rolling production lines. The company plans to invest and construct the project in three phases. It is estimated that the investment in the first phase is 5.5 billion yuan, and the investment in the second and third phases are 2.5 billion yuan and 2.0 billion yuan respectively; The construction period of the first phase is 24 months, and the planned construction period of all phase III projects is 60 months. The company sits on panjiatian vanadium titanium magnetite, with 296 million tons of mine resource reserves, 32.02 million tons of overall titanium resource reserves (calculated by titanium dioxide), rich titanium resource reserves and rich green power resources (hydropower, photovoltaic and wind power resources) in Panzhihua area, which lay the foundation for the company to build the whole industrial chain project of “vanadium titanium magnetite sponge titanium ingot, titanium sector energy grade titanium (alloy) materials”.
The capacity utilization rate of China’s sponge titanium industry is low, and the high-end capacity is still insufficient. The production capacity and output of sponge titanium in China rank first in the world, but the utilization rate of sponge titanium production capacity in China and the world is low. According to USGS, in 2021, the global sponge titanium production capacity was 350000 tons / year, and the sponge titanium production capacity in China was 177000 tons / year, accounting for 51%; In 2021, the global output of sponge titanium was 210000 tons, and the output of sponge titanium in China was 120000 tons (139900 tons according to the data of China Nonferrous Metals Association), accounting for 57%; The utilization rates of sponge titanium production capacity in the world and China are 60% and 68% respectively. Since 2016, China has been a net importer of sponge titanium. According to the General Administration of customs, in 2021, China’s imports of sponge titanium increased by 193% to 13800 tons year-on-year, and its net imports increased by 211% to 13000 tons year-on-year. Although most Chinese sponge titanium enterprises already have the production capacity of high-end sponge titanium, the production capacity of military small particle sponge titanium is insufficient. At present, it mainly depends on import, and the added value of high-end sponge titanium is high. Therefore, the import unit price of Chinese sponge titanium is 7600 US dollars / ton and the export unit price is 5100 US dollars / ton, with obvious price difference between the two.
The company is expected to become the world’s largest sponge titanium manufacturer and reshape the industry pattern. Global sponge titanium production enterprises are mainly concentrated in China, Russia and Japan. Russia vsmpo-avisma company is the world’s largest sponge titanium manufacturer with a production capacity of 46500 tons / year; Japan’s sponge titanium enterprises are mainly Osaka technology company (OTT) and Toho, with production capacity of 44000 tons and 25000 tons / year respectively. In terms of Chinese manufacturers, according to the statistics of Baichuan Yingfu, sponge titanium enterprises with a capacity of more than 20000 tons mainly include Baisheng titanium industry, Xiangsheng new material, JINDA titanium industry, Zunyi Titanium Industry, shuangruiwanji and Pangang Group Vanadium Titanium & Resources Co.Ltd(000629) , with a capacity of 3.5, 3.0, 2.5, 2.5, 23 and 20000 tons respectively. Therefore, without considering the expansion of other enterprises, the company will become the largest producer of sponge titanium in the world after the construction of 60000 tons of sponge titanium capacity, It is expected to reshape the industry pattern.
The company promotes the expansion of titanium application field with cost advantage and helps the industrial upgrading. Traditional titanium metallurgy has the disadvantages of long process cycle, high energy consumption and low utilization rate, which leads to high cost and high price of titanium alloy, which limits its wide application, resulting in low capacity utilization rate of sponge titanium, more inefficient and ineffective capacity, and the industry falls into the dilemma of insufficient high-end capacity and excess low-end capacity. Reducing the cost of titanium and titanium alloy is an important way to further expand the application of titanium. The company is a leading enterprise in China’s titanium mine and has strong bargaining power in the titanium concentrate market. The company can reduce the production cost and energy consumption of sponge titanium, expand the application field of titanium alloy materials, break the vicious circle pattern of small scale and insufficient rigid demand of sponge titanium in China, and help the industrial upgrading with the advantages of its own titanium mine resources, low-cost clean energy in the park and capacity scale effect.
Profit forecast and investment rating: without considering the contribution of this investment project, we expect the company’s net profit attributable to the parent company from 2022 to 2024 to be RMB 1.703 billion, 1.842 billion and 1.974 billion respectively, EPS to be RMB 4.25, 4.59 and 4.92/share, and the PE corresponding to the current stock price to be 9x, 8x and 8x. Considering that the price of titanium concentrate is expected to continue to rise and the extension and endogenous expansion ability supported by the company’s excellent financial situation, the “buy” rating of the company is maintained.
Risk factors: the price of titanium concentrate or iron concentrate falls; The demand for titanium dioxide decreased; The production progress of sponge titanium project is less than expected.
