Dongguan Securities: China Nuclear Titanium dioxide three-quarter results pre-increase 1.7-2.2 times the volume and price rise worry-free for the whole year

On September 22nd, the company issued a forecast of results for the third quarter of 2021. It is expected that the return net profit for the first three quarters will be between 961 and 1.139 billion yuan, an increase of 170% Murray 220% over the same period last year, and the performance growth is in line with expectations.

The price of titanium dioxide increased greatly compared with the same period last year, and the performance is expected to increase sharply in the first three quarters. The high performance of the company in the first three quarters of 2021 is mainly due to:

(1) the market of rutile titanium dioxide, the main product of the company, is in a strong business cycle, the supply of products falls short of demand, and the sales price increases greatly compared with the same period last year.

(2) the company strictly controls the cost by locking low-cost bulk raw materials, and adjusts its marketing strategy in real time according to the market situation;

(3) the company has further strengthened its internal management, improved its operating efficiency and brought about performance growth.

In the third quarter alone, the company expects the net profit of Q3 to be between 3.05 and 483 million yuan, with a year-on-year growth rate of 174.66%-335.21%, which is slower than the year-on-year growth rate of Q2, which is expected to be related to the decline in the price of Q3 titanium dioxide compared with the same period last year and month-on-month.

The company's product prices have been raised many times this year, and Q4 performance is expected to maintain rapid growth. According to the company announcement, the company has raised the price of its products seven times so far this year. As of September 17, the company quoted 20500-21000 yuan / ton of rutile titanium dioxide by sulfate method, up about 18% from the beginning of the year and about 50% from the same period last year. Titanium dioxide prices after a brief fluctuation in Q3, due to the rising prices of upstream raw materials and the arrival of the peak season of downstream demand, are gradually returning to the upward trend, and the company is expected to continue to benefit from high product prices in the fourth quarter.

It is planned to build a lithium iron phosphate project with an annual output of 500000 tons and lay out the power battery industry. In February 2021, the company announced that it plans to build a project with an annual production capacity of 500000 tons of lithium iron phosphate, with an estimated total investment of 12.1 billion yuan and a final annual profit of 5.28 billion yuan. The project is divided into three phases: 100000 tons in the first phase, 200000 tons in the second phase and 200000 tons in the third phase, mainly for the construction of lithium iron phosphate production line and supporting facilities. The purpose of this project investment is to build a new material circular economy industrial park of "sulfur-phosphorus-iron-titanium-lithium", which will help the company to accelerate the transformation and upgrading and improve the overall strength and comprehensive competitiveness of the enterprise.

Investment suggestion: the new production capacity of titanium dioxide, the company's main product, will continue to be released in the next few years to support the company's performance; the company will extend the layout of lithium iron phosphate, expand the scale of business, and accelerate transformation and upgrading. It is estimated that the company's basic earnings per share in 2021 is 0.68 yuan, and the current share price corresponds to a price-to-earnings ratio of 25 times. It is covered for the first time and is cautiously recommended and rated.

Risk tips: downstream demand is lower than expected, product prices fall, new project construction and profitability are less than expected and other risks.