\u3000\u3 China Vanke Co.Ltd(000002) 601 Lb Group Co.Ltd(002601) )
Event: the company released its annual report for 2021. In 2021, the company realized an operating revenue of 20.566 billion yuan, a year-on-year increase of 45.77%; The net profit attributable to the shareholders of the parent company was 4.676 billion yuan, with a year-on-year increase of 104.33% and earnings per share of 2.12 yuan. The company released the first quarter report of 2022. In the first quarter, the company achieved an operating revenue of 6.068 billion yuan, a year-on-year increase of 30.63% and a month on month increase of 14.54%; The net profit was 1.064 billion yuan, a year-on-year increase of 0.03% and a month on month increase of 25.83%.
The prosperity of titanium dioxide industry is rising, and the volume and price rise together to promote the growth of the company’s performance. The company is a leading enterprise in China’s titanium dioxide industry, with the largest scale and export volume in China. In 2021, China’s titanium dioxide industry generally operated well. Affected by factors such as the increased demand for titanium dioxide driven by the global economic recovery and the rise of raw material prices, the production and sales of titanium dioxide market were booming, the price of titanium dioxide rose step by step, and the prosperity was improved. The company’s titanium dioxide business achieved a simultaneous increase in volume and price, which promoted the growth of annual performance. In 2021, the output of titanium dioxide of the company was 902200 tons, with a year-on-year increase of 10.41%, of which the output of titanium dioxide by sulfuric acid method and titanium dioxide by chlorination method were 646100 tons and 256200 tons respectively, with a year-on-year increase of 6.86% and 20.52%; In terms of sales volume, the company sold 877800 tons of titanium dioxide in the whole year, with a year-on-year increase of 5.46%, including 621200 tons of titanium dioxide by sulfuric acid method and 256600 tons of titanium dioxide by chlorination method, with a year-on-year decrease of 2.75% and an increase of 32.52% respectively. The rapid growth of titanium dioxide sales by chlorination method promoted the sales volume of titanium dioxide business of the company. In terms of price, the average selling price of titanium dioxide in 2021 was 17314 yuan / ton, up 31.6% year-on-year. The revenue of titanium dioxide in the whole year was 15.199 billion yuan, a year-on-year increase of 38.79%, accounting for 73.90% of the operating revenue, a year-on-year decrease of 3.72 percentage points. In addition, the company’s revenue from iron products was 2.110 billion yuan, a year-on-year increase of 10.72%, that from titanium products was 1.292 billion yuan, a year-on-year increase of 58.99%, and that from zirconium products was 977 million yuan, a year-on-year increase of 341914%. Driven by various businesses, the company achieved an annual revenue of 20.617 billion yuan, a year-on-year increase of 45.56%.
From the perspective of profitability, the upstream and downstream prices of titanium dioxide industrial chain showed an upward trend in 2021. Relying on the advantages of industrial chain integration, the price of self-produced titanium concentrate, sulfuric acid and other raw materials, as well as the stable supply of synthetic rutile and high titanium slag, the company ensured the continuous production and product quality of titanium dioxide and sponge titanium, and its profitability was improved. Throughout the year, the company’s titanium dioxide business was 45.02%, with a year-on-year increase of 9.03 percentage points, the gross profit margin of iron products was 48.57%, with a year-on-year increase of 4.88 percentage points, and the gross profit margin of titanium products and zirconium products was 22.39% and 2107%, with a year-on-year increase of 10.53 and 9.04 percentage points. The company’s annual comprehensive gross profit margin was 41.93%, an increase of 6.58 percentage points year-on-year. Driven by the improvement of revenue and profitability, the company achieved a net profit of 4.676 billion yuan, a year-on-year increase of 104.33%.
In 2022, the price of titanium dioxide continued to rise, and the performance in the first quarter maintained a good trend. Since the end of 2021, titanium dioxide leading enterprises represented by the company have raised the price of titanium dioxide for three consecutive times, promoting the price of titanium dioxide in China to continue to maintain an upward trend. The export situation of titanium dioxide also maintained a good trend, and the industry boom was running at a high level. In the first quarter, the company realized an operating revenue of 6.068 billion yuan, a year-on-year increase of 30.63% and a month on month increase of 14.54%; The net profit was 1.064 billion yuan, a year-on-year increase of 0.03% and a month on month increase of 25.83%. Affected by the rise in the prices of raw materials titanium concentrate and sulfuric acid in the same period, the company’s gross profit margin in a single quarter fell month on month. The comprehensive gross profit margin in the first quarter was 34.81%, up 2.66 percentage points year on year and down 5.15 percentage points month on month.
Cutting into the lithium battery industry chain, the iron phosphate project will be in large quantities soon. Relying on the cost advantage brought by ferrous sulfate, a by-product of titanium dioxide industry, the company cuts into the lithium battery industry chain. Layout multiple projects by means of new projects, cooperation and acquisition. Including 200000 tons of battery material grade iron phosphate project, 200000 tons of lithium-ion battery material industrialization project, 100000 tons of artificial graphite cathode material project for lithium-ion battery, 200000 tons of lithium-ion battery cathode material integration project, 150000 tons of electronic grade lithium iron phosphate project, including 200000 tons of battery material grade iron phosphate project (50000 tons of iron phosphate in phase I) The industrialization project with an annual output of 200000 tons of lithium-ion battery materials (50000 tons of lithium iron phosphate in phase I) and the artificial graphite anode material project with an annual output of 100000 tons of lithium-ion batteries (50000 tons of graphite anode in phase I) have entered the trial production stage or have the conditions for production.
By increasing R & D investment and introducing high-end talents, the company has accumulated advanced large-scale production technologies of iron phosphate, lithium iron phosphate and graphite negative electrode. At the same time, the company’s existing raw material supply system can effectively support the company’s new energy development strategy. The company’s waste by-product ferrous sulfate and surplus capacity, caustic soda, sulfuric acid, steam and hydrogen, etc. can be directly or indirectly used in the production of positive and negative materials of lithium batteries to reduce production costs. The company’s series of new projects in the field of lithium battery materials are expected to open the ceiling of the company’s development and cultivate the second growth curve.
Profit forecast and investment rating: it is estimated that the company’s EPS in 2022 and 2023 will be 2.11 yuan and 2.47 yuan. Based on the closing price of 19.24 yuan on April 21, PE will be 9.10 times and 7.80 times respectively, giving the company an investment rating of “overweight”.
Risk tip: the price of raw materials has risen sharply, and the overseas demand is less than expected
