[agency Review] Longbai Group's performance is in line with expectations and plans to build 200000 tons of chlorinated titanium dioxide in Panxi.

Events: (1) the company achieved revenue of 15.268 billion yuan in the first three quarters, an increase of 54.25%, and a net profit of 3.831 billion yuan, an increase of 96.5%. Of this total, the revenue in the third quarter was 5.468 billion yuan, an increase of 51.24%, and the net profit of returning to the mother was 1.396 billion yuan, an increase of 112.51%. As expected. (2) it is planned to invest 3.5 billion yuan to build a demonstration project for the comprehensive recovery of 200000 tons of titanium chloride, vanadium and scandium and other rare metals in Panxi, together with a 1 million-ton high-salt wastewater treatment project, with an estimated construction period of 4 years and 6 months.

In the third quarter, the prices of titanium dioxide and titanium concentrate were basically the same, while the price of sulfuric acid rose sharply. Benefiting from the demand for completion, the average price of red titanium dioxide in the third quarter was 19665 yuan / ton, + 55.88% year-on-year and-1.03% compared with the same period last year; the average price of titanium concentrate with high titanium slag in the third quarter was 2351 yuan / ton, which was + 65.43% year on year and-2.63% compared with the same period last year. The average price difference of "titanium dioxide-titanium concentrate-sulfuric acid" (deducting tax) in the third quarter was 11207 yuan / ton, + 28.18% year-on-year, and-4.86% compared with the same period last year. As the company has part of the sulphuric acid package, the overall gross profit margin in the third quarter is basically the same as that in the second quarter. Further bind the upstream raw materials to promote the development of the second growth curve of lithium-ion battery materials. The company invested 724 million yuan in R & D in the first three quarters, and the expense rate increased 0.34PCT to 4.73% compared with the same period last year. During the reporting period, the company announced plans to invest 600 million yuan to build a 7 million-ton green and efficient mineral processing project, which is expected to be completed in March 2023, which will increase the company's raw ore handling capacity to 22 million tons / year, iron concentrate 5 million tons / year, titanium concentrate 1.2 million tons / year and so on. At the same time, we will promote the production capacity construction of 50, 000 tons of ferric phosphate, 50, 000 tons of lithium iron phosphate and 25000 tons of graphite negative electrodes.

Investment advice: taking into account the sustainability of the titanium dioxide boom and the growth brought about by a large number of proposed projects, we expect the company's revenue from 2021 to 2023 to be 195,280 and 35.3 billion yuan respectively, an increase of 38%, 44% and 26% over the same period last year, and the net profit of the parent company reached 50, 69 and 8.3 billion yuan, an increase of 118%, 38% and 20% over the same period last year, corresponding to an EPS of 2.1,2.9,3.5 yuan respectively, maintaining the "buy" rating.

Risk Tip: the progress of the new project is lower than expected and the product price is lower than expected.