Longbai Group (002601): Giant in the titanium industry: Panxi Titanium Mining Corporation holds titanium chloride slag in its hands

 Longbai Group Company has grown into a global leader in the titanium industry. Since the company officially entered the titanium dioxide industry in 1988, it has become the global leader in the titanium industry chain with its current annual production capacity of 1.51 million tons of titanium dioxide, annual production capacity of 50,000 tons of titanium sponge, and high-quality titanium ore reserves in Panxi region of China. The company's equity structure is clear, and the actual controller is Mr. Xu Gang, the company's founder. March 2023 In January, the company introduced a new board of directors and management, and the senior management team became younger and more professional. The company will continue to increase its main business layout in the future. It is estimated that in 2025, the chlorinated titanium dioxide production capacity will be 860,000 tons/year and the sponge titanium production capacity will be 140,000 tons/year.

  The company actively deploys titanium ore resources and will fully benefit from the long-term prosperity of titanium concentrates. China's demand for titanium concentrate is about 11 million tons/year, of which about 30% comes from imports. In the next two years, the new increase will mainly come from Longbai, which will replace high-priced titanium concentrate imports. Overseas mining companies are not willing to spend capital. In the next two years, many mineral sources from mining companies such as Tronox, Kenmare, and Base will be exhausted. Titanium concentrate prices are expected to maintain a long-term boom under supply constraints. After the company consolidated its plan to revitalize the mining industry in 2022, it will control the amount of vanadium-titanium magnetite resources to double, and currently has a titanium concentrate production capacity of approximately 132 Ten thousand tons/year, and is expected to reach 2.48 million tons/year in 2025. We estimate that the company's titanium concentrate business will contribute approximately 22% of the gross profit in 2022, and the gross profit in 2025 is expected to exceed 3 billion yuan, accounting for more than 30%.

  Successfully applied titanium chloride slag technology to improve the self-sufficiency rate of titanium concentrate and effectively reduce production costs. The company pioneered the process of processing titanium concentrate into titanium chloride slag in China, improving the quality and reducing impurities of domestic titanium concentrate, and overcoming the problem of importing raw materials for large-scale fluidized chlorination process. At present, the company has a titanium chloride slag production capacity of 230,000 tons/year, which is expected to increase to 540,000 tons/year in the next two years, greatly increasing the self-sufficiency rate of chlorinated titanium dioxide raw materials.

  The company actively promotes diversified mineral development. With the construction of the concentrator's production capacity, it is expected that the company's annual iron concentrate production capacity will reach 7.6 million tons in 2025, and the gross profit is expected to reach 1.8 billion yuan, accounting for more than 15% of the gross profit; the company actively promotes the vanadium extraction project from iron concentrate, and it is expected that the V2O5 production capacity will reach 30,000 tons/year; the company acquired equity in Dongfang Zirconium Industry in 2019 and subscribed for a fixed increase in 2020, and the profit of zirconium products will grow steadily.

  Earnings forecast: The company will fully benefit from the improvement of the industrial chain and production capacity expansion. We expect to achieve revenue of 284/313/32.8 billion yuan in 2023-25, a year-on-year +17.6%/+10.2%/+4.7%, and net profit attributable to the parent company will be 27.5/40.5/54.2 billion yuan, a year-on-year-19.7%/+47.6%/+33.8%. We refer to Xingfa Group, Jinshi Resources and Hualu Hengsheng, the leaders in China's sub-sectors that have self-sufficient mineral resources, advantages of industrial chain integration and diversified expansion, and give the company a net profit of 15% attributable to the parent in 2024. Times PE, target market value of 60.8 billion yuan,"buy" rating.