[agency Review] the quantity and price of titanium dioxide in Longbai Group increases continuously.

Event: Longbai Group issued a performance forecast for 2021, and the company expects to return to its mother with a net profit of 4.577 billion yuan to 5.722 billion yuan, an increase of 100% 150% over the same period last year. Corresponding to the fourth-quarter net profit of 747 million yuan to 1.891 billion yuan, a month-on-month decrease of 46.52% to an increase of 35.46%.

Comments: titanium dioxide market is in a business cycle, volume and price performance increased significantly compared with the same period last year. Since the third quarter, the production of titanium dioxide enterprises has been disturbed by environmental protection, power restriction and other factors, the operating rate has decreased, and the market supply is tight. In November, the impact of power cuts has weakened, the operating rate of titanium dioxide enterprises has increased, and the supply pressure has been alleviated, but the demand side has entered the traditional off-season, slightly weakening. Throughout the year, titanium dioxide is still in the business cycle. As of December 5, the average price of rutile titanium dioxide was 19132 yuan / ton, an increase of 5168 yuan / ton over last year, and the price difference between titanium dioxide and titanium concentrate was 14052 yuan / ton, an increase of 3799 yuan / ton over the same period last year. Although the sharp rise in the price of raw and auxiliary materials and transportation costs has a certain adverse impact on business performance, the competitive advantage of the company's vertical integration of the whole industry chain is fully demonstrated. At the same time, the utilization rate of existing titanium dioxide capacity is improved, especially the chlorination process capacity is effectively released to ensure the company's performance upward.

The export of titanium dioxide continues to improve, and the company's share may continue to increase. According to customs data, the export volume of titanium dioxide in October 2021 was about 115800 tons, an increase of about 8000 tons compared with September. Coupled with the reduction in sea freight prices, the export market of titanium dioxide is expected to continue to improve in November. For many months of the year, the export volume has been maintained at the level of more than 100000 tons, and the exuberant export of titanium dioxide has become the norm. In November, the international titanium dioxide giant enterprises collectively raised the price of titanium dioxide, and the price increases of Comu, Te Nuo, Pan Neng Tinto and Konos were 300-400 US dollars per ton. The price of titanium dioxide in the international market has increased, while the off-season in the domestic market is expected to be transmitted in the later period. According to the announcement, the company signed a strategic cooperation agreement with Australia East Zirconium Resources Co., Ltd. to further ensure the stable supply of raw materials; Longbai Xiangyang added 200000 tons / year titanium dioxide post-processing production line, the company's titanium dioxide product competitiveness and market share may be further enhanced.

With the addition of new energy battery materials, the second growth curve is clear. According to the interactive platform, the first phase of the company's 200000 tons of iron phosphate, 200000 tons of lithium iron phosphate and 100000 tons of graphite negative electrode project is expected to be completed and put into production by the end of the year. In addition, the company also plans to produce 200000 tons of lithium-ion battery anode materials integration project and 150000 tons of battery-grade lithium iron phosphate project located in Nanzhang County. The new energy material project invested by the company will form a new performance growth point, form a synergistic effect with the existing titanium industry chain, and ensure the development of the enterprise during the 14th five-year Plan.

Risk hint: the price of titanium dioxide fluctuates greatly and the project production schedule is not as expected.

Profit forecast: the net profit from 2021 to 2023 is expected to be 4.989 billion yuan, 5.425 billion yuan and 5.814 billion yuan respectively, and the EPS is 2.09,2.28,2.44 yuan respectively.