\u3000\u3000 Baoji Titanium Industry Co.Ltd(600456) (600456)
Event overview: on January 21, the company issued an announcement on the pre increase of performance in 2021: it is expected to realize a net profit attributable to the parent company of 550 million yuan to 580 million yuan in 2021, with a year-on-year increase of + 51.66% to + 59.93%, and a net profit attributable to the parent company of 490 million yuan to 520 million yuan after deduction of non profits, with a year-on-year increase of + 53.73% to + 63.13%. According to the calculation, the net profit attributable to the parent company in 2021q4 is 79 million yuan to 109 million yuan, q3-59.24% to – 43.71% month on month, 52 million yuan to 82 million yuan after deduction of non parent company, q3-71.54% to – 55.20% month on month.
Analysis and judgment:
The price of sponge titanium rose sharply, dragging down the performance of 2021q4. In terms of price, the 2021q4 titanium industry maintains a high outlook, and the price focus of the industrial chain continues to move upward, but the increase of raw material price is much higher than that of titanium. The average price of 2021q4 sponge titanium market is 13.27% higher than Q3, while the average price of 2021q4 titanium sector is only 2.34% higher than Q3. Sponge titanium accounts for more than 80% of the production cost of titanium materials. It is expected that the gross profit margin of 2021q4 company will decline due to the increase in the price of sponge titanium. In terms of sales volume, the company’s titanium products are gradually in large quantities. In the first three quarters of 2021, the company achieved a sales volume of 19600 tons of titanium products, a year-on-year increase of + 39.29%. We believe that the sharp decline in the performance of 2021q4 company is mainly due to the higher price increase of raw material sponge titanium than that of titanium.
The company is the leader of titanium materials in China. The company is a high-tech enterprise engaged in R & D, production and sales of titanium and titanium alloy products. It is the only enterprise in China with a complete industrial chain of casting forging titanium processing. The annual output of titanium materials of the company ranks first in China, and it is one of the most important suppliers of titanium materials for aviation and aerospace in China. By the end of 2020, the company’s design capacity of sponge titanium is 10000 tons / year, the design capacity of titanium ingot is 25000 tons / year, and the design capacity of titanium materials is 20000 tons / year. With the future aerospace wide titanium alloy sector and foil projects and high-quality titanium ingot, pipe and profile projects put into operation, the leading position of the company will be more stable.
The high-end titanium material project has been put into operation gradually, and the structure of titanium products has been continuously optimized. At the beginning of 2021, the company successfully completed the non-public offering of shares, raising a net fund of 1.968 billion yuan, which effectively guaranteed the smooth implementation of the titanium project invested by raising funds. (1) Aerospace wide width titanium alloy sector and strip foil project is expected to increase production by 1500 tons / year of sector, 5000 tons / year of titanium strip and 500 tons / year of foil; (2) The project of high-quality titanium ingots, pipes and profiles is expected to increase the production of titanium ingots by 10000 tons / year, pipes by 290 tons / year and titanium alloy profiles by 100 tons / year; It is expected that the titanium material project will be gradually put into operation in 2022, and the titanium product structure of the company will be further optimized at that time.
Expand the production of sponge titanium and zirconium tetrachloride to narrow the gap of raw materials of the company. The expansion project with an annual output of 12000 tons of sponge titanium and 3000 tons of zirconium tetrachloride has been gradually promoted. By the first half of 2021, 59.6% of the project progress has been completed. The expansion project will help the company narrow the supply gap of raw materials and further enhance the stability of the company’s performance.
Investment suggestion: benefiting from the development of downstream fields such as aerospace and ocean engineering, the company has broad demand for titanium materials. With the production of high-end titanium products, the company’s profitability is expected to continue to rise. We expect that the net profit attributable to the parent company from 2021 to 2023 will be 568 / 701 / 885 million yuan in turn, corresponding to the closing price of 54.41 yuan on January 21, 2022. The PE from 2021 to 2023 will be 46 / 37 / 29 times in turn. The company will be given a “recommended” rating for the first time.
Risk warning: downstream demand is less than expected; The price rise of raw materials exceeded expectations; The project is not progressing as expected.
