Pacific Securities: vanadium and Titanium of Panzhihua Iron and Steel Co., Ltd.

The company is the leader of vanadium industry, with a future production capacity of 60,000 tons and a market share of 40%. At present, the company has a production capacity of 22000 tons of vanadium pentoxide and adopts sodium vanadium extraction technology, and its products are mainly ferrovanadium and vanadium nitrogen alloy, as well as vanadium aluminum alloy and high purity vanadium pentoxide (electrolyte). The acquisition of 100% shares in Xichang Vanadium products Co., Ltd. is progressing smoothly and is expected to merge in the fourth quarter with a production capacity of 18000 tons, using calcified vanadium extraction technology. On September 6, 2021, the company announced a joint venture with Sichuan Desheng Group to build a vanadium slag processing production line with an annual production capacity of 20,000 tons of vanadium pentoxide. If all goes well, the company will have an annual production capacity of 60,000 tons of vanadium pentoxide in 2022, and the domestic market share is expected to reach about 40%, making it an absolute leader in the industry.

The field of energy storage: open up a new space for vanadium demand. The demand structure of vanadium is relatively stable, mainly concentrated in the iron and steel industry, accounting for about 90%. Vanadium battery industry is on the eve of commercial application, is expected to become a new demand growth point, and is expected to become the first stage of vanadium battery explosion in the next five years. According to the calculation that 1GWh vanadium battery needs 10, 000 tons of vanadium oxide, it is assumed that the installed capacity of vanadium battery will be 4GWH in 2025, and the new demand will be 40, 000 tons, which will have a great impact on the balance sheet of supply and demand. We expect that with the development of energy storage leading to the improvement of the application permeability of vanadium batteries, vanadium is expected to become an energy metal after lithium, cobalt and nickel.

Titanium dioxide business: both sulfuric acid method and chlorination method. At present, the company has a production capacity of 235000 tons of titanium dioxide. In terms of titanium dioxide, Chongqing titanium industry has sulfuric acid titanium dioxide 100000 tons / year, Panzhihua Dongfang titanium industry has sulfuric acid titanium dioxide 120000 tons / year, chlorination titanium dioxide 15000 tons / year, a total of 235000 tons / year titanium dioxide production capacity. The company plans to build a process line of 60, 000 tons of titanium dioxide by chlorination process, with a long-term planned production capacity of 200000 tons. In terms of titanium slag products, the company has an acid-soluble titanium slag production capacity of 200000 tons / year. The company is not only one of the five domestic enterprises with the production capacity of titanium dioxide by chlorination process, but also one of the few enterprises with titanium dioxide products by "sulfuric acid process + chlorination process".

For the first time, it is given a "buy" rating with a target price of 9.9 yuan. We believe that with the promotion of vanadium battery applications, the demand structure of the vanadium industry is changing, which on the one hand increases the vanadium price, on the other hand, it can enhance the valuation of the industry in the secondary market. According to the comprehensive calculation, the company's net profit from 2021 to 2023 is expected to be 13.58max 28.15 / 3.821 billion yuan, corresponding to EPS 0.16max 0.33max 0.44, corresponding to the previous share price PE 27.7max 13.37kg 9.85 times, the first coverage, given the "buy" rating, the target price is 9.9yuan, corresponding to the 2022 price / earnings ratio of 30 times. The brilliance of vanadium battery in the field of energy storage will make the company grow into a company with a market capitalization of hundreds of billions and become the Ganfeng lithium industry of the vanadium battery industry!

Risk tips: vanadium battery promotion is not as expected; vanadium price demand continues to decline; the company's new project landing is not as expected