Industry Prosperity Continues To Rise, Titanium Dioxide Price Jumps 60%, Longmang Bailey Profit Will Set A Record High

According to the current product price and Industry Supply and demand situation, longmang Bailey's profit this year is bound to reach a record high, but the company's share price has not reached a corresponding new high, which is still lower than the high point formed in February this year.

As of June 15, the mainstream quotation of domestic rutile titanium dioxide is 19800-21000 yuan / ton. If wind data is used, the price of the product has risen to 20400 yuan / ton, which is in the absolute high price area since 2005.

Prior to this, titanium dioxide has been rising for three consecutive quarters, and the current price has increased by 60.88% compared with the end of the third quarter of 2020.

This has become the key to promote the profitability of relevant listed companies. During this period, the net profit of longmang Bailey, the leading domestic industry leader, has continuously reached the best level in history. The profit has increased from 339 million yuan in Q4 in 2020 to 1.064 billion yuan in Q1 this year.

On June 14, the company estimated that Q2 net profit this year would increase to 1.263 billion yuan to 1.91 billion yuan.

What's more, giants at home and abroad, including longmang Bailey, chemours and Venator, have "made an appointment" in advance to raise the price of products in July.

According to the 21st Century Capital Research Institute, the price of titanium dioxide in the third quarter is expected to remain at a high level with the support of export, cost factors, and the coming of "gold, silver and ten" peak season. Titanium dioxide manufacturers, including longmang Bailey, are still expected to achieve month on month growth in the third quarter of this year, and the annual profit scale will probably reach a record high.

Three factors support high prices

"The white inorganic pigment with the best performance, the most widely used and the largest amount in the world" is described in the titanium dioxide commercial product manual compiled by Panzhihua vanadium and titanium trading center.

In terms of downstream demand, it is mainly applied to the coating industry, plastic industry and paper industry. The coating industry accounts for 55%, including automotive paint, etc., and 25% and 14% of the demand comes from the plastic and paper industry.

In terms of its application scenarios, it is closely linked with manufacturing and light industry, and terminal consumption is highly positively correlated with macroeconomic growth.

In the rising process from September 2020 to now, titanium dioxide has been stimulated by the above demand side.

Previously, the column of the 21st century economic report "hard core investment and research" pointed out that after the outbreak of Xinguan epidemic in 2020, the control of overseas epidemic situation lagged behind that of China, leading to the transfer of some foreign demand to the domestic market, which led to a large increase in the export volume of domestic related products.

Titanium dioxide is suitable for the logic of demand pulling.

Compared with historical data, it can also be seen that the growth rate of domestic titanium dioxide export has increased significantly since 2020.

According to the data of the General Administration of customs, from 2016 to 2019, China's export volume of titanium dioxide was 720500 tons, 830900 tons, 907200 tons and 1.03400 tons, respectively, with a growth rate of about 10%. However, in 2020, the export volume reached 1214800 tons, and the growth rate increased to 21.06%.

Especially in 2021, with the overseas epidemic situation under effective control, the export growth rate in the first quarter will further expand to 41%.

Secondly, the rising cost of raw materials such as titanium concentrate and sulfuric acid also provides a strong support for the price of titanium dioxide.

At present, the production process of titanium dioxide mainly includes sulfuric acid process and chlorination process, and domestic manufacturers mainly use sulfuric acid process.

According to the prediction of Shengang securities, "the cost of raw materials such as sulfuric acid and titanium concentrate accounts for about 50%

On the contrary, the price trends of the two products mentioned above are in the historical high range of prices in recent ten years.

Wind data shows that as of the first ten days of June 10, the domestic market price of sulfuric acid (98%) was 600 yuan / ton, which was 471.4% higher than the low at the end of August 2020; As of June 15, the price of < 50% titanium concentrate in Sichuan was 2000 yuan / ton, up 33% compared with August 2020.

Thirdly, it is the supply pattern of titanium dioxide industry, and higher industry concentration is conducive to the price rise.

According to the data of Shengang Securities Research Report, the total production capacity of titanium dioxide in the world is about 8 million tons, of which the production capacity is mainly monopolized by five multinational giants such as Keqi (1.37 million tons), tenor (1.24 million tons), Connors and Coste, accounting for 90% of the total.

The domestic market has a total production capacity of 4.23 million tons, of which, after restructuring with longmang titanium industry, the total production capacity of Bailian reached 1.05 million tons. China Nuclear titanium dioxide and Shandong Dongjia ranked second and third with 330000 tons and 240000 tons respectively, ranking the second echelon. The rest are many small and medium-sized enterprises with less than 100000 tons.

Under the above supply pattern, leading enterprises have a strong control over the price of titanium dioxide.

Domestic and foreign leaders join hands to "lock price"

In the recent titanium dioxide market, there has been a collective "price locking" of domestic and foreign industry leaders.

On May 31, Como issued a letter of titanium dioxide price increase notice, saying that from July 1, 2021, the company will purchase all specifications of Ti pure titanium dioxide in Greater China region by US $200 / ton.

On June 8, longmang Bailey issued a notice on titanium dioxide price adjustment, saying that according to the titanium dioxide market demand, raw material price rise and other factors, the company's price committee has decided that, from July 1, 2021, the sales price of various types of titanium dioxide (including sulfuric acid process titanium dioxide and chlorination process titanium dioxide) will be increased by 500 yuan / ton for various downstream customers on the basis of the original price.

It's still early. Why did you lock in the sales price in July?

The reason is that the off-season is coming. The off-season consumption of titanium dioxide industry is from June to August every year, and from December to February of the next year. Now, in the off-season, leading enterprises raise the sales price of titanium dioxide in July in advance, which undoubtedly shows a certain intention of supporting prices.

In fact, after entering June, the market has indeed shown the characteristics of off-season.

According to the research of Yang Xun, a chemical raw material purchasing platform, the characteristics of the current off-season are very obvious, the demand is shrinking, and the speed of cargo holding companies is slowing down. At the same time, due to the high sea freight, serious shortage of positions, difficulties in booking cabinets, appreciation of RMB, and high price, the volume of foreign trade goods and new orders declined.

In other words, after entering the off-season, the decrease of market trading activity is not conducive to the continued rise of titanium dioxide price.

However, due to the collective price lock of leading enterprises and the advance increase of product prices in July, the current titanium dioxide price remains high.

After entering August, the market will enter the early peak season. In addition, the coming of the "gold, silver and ten" consumption peak season and the support of the above-mentioned sustained economic recovery, titanium concentrate and other cost side support, titanium dioxide powder in the third quarter still can not rule out the possibility of further rise.

Even if the price of titanium dioxide does not rise, but only maintains the current price of 20000 yuan / ton, the average sales price of related enterprises in the third quarter will be significantly higher than that in the second quarter. The improvement of the potential prosperity will directly promote the growth of profitability of enterprises in the relevant industrial chain.

It should be pointed out that, different from other industries, the overall business concentration of titanium dioxide related listed companies is relatively high. Under the background of rising prices of titanium dioxide and titanium concentrate and systematic improvement of industry prosperity, the profit elasticity of titanium dioxide industry companies in 2021 will also be extremely prominent.

Longmang Baili's annual profit may exceed 5 billion yuan

Industry prosperity continues to be at a high level, and the earnings expectations of relevant listed companies also need to be adjusted accordingly.

In the process of titanium dioxide rising from 12680 yuan / ton to 20400 yuan / ton in October 2020, longmang Baili and other companies have begun to realize their financial performance.

According to the statistics of 21st Century Capital Research Institute, from Q4 2020 to Q1 2021, the average price of domestic rutile titanium dioxide will rise from 14777 yuan / ton to 17312 yuan / ton, and then to 19756 yuan / ton in Q2 (as of June 15) in 2021.

Over the same period, longmang Baili's net profit increased from 339 million yuan to 1.064 billion yuan, and the company's recent forecast of 1.587 billion yuan (median forecast net profit in the second quarter).

Obviously, the price of titanium dioxide has a strong positive correlation with the profit scale of longmang Bailey. On the other hand, the annual output and sales of longmang Baili in 2021 are expected to increase slightly.

According to the annual report, in 2020, the output and sales volume of titanium dioxide of the company will be 817200 tons and 832400 tons respectively, with a year-on-year increase of 29.73% and 33.11%.

According to the requirements of the 2021 supply and marketing conference of Longbai Group Chairman Xu Gang, it is necessary to maintain the balance between the production capacity release and marketing work of titanium dioxide in 2020, and "double 90" must be realized, so as to seize the good market in 2021 and quickly improve the production and sales volume. "

According to the above target, the company's sales volume is expected to increase by about 10% in 2021.

Combined with the promotion of titanium dioxide adjustment on the profit margin of listed companies, as well as the forecast net profit of RMB 2.327 billion to RMB 2.994 billion in the first half of the year, the profit scale of longmang Baili reached a record high in the whole year.

The 21st Century Capital Research Institute believes that the third quarter of this year benefited from the initiative to support prices and the first half of the peak season. It is expected that longmang Baili's net profit is still expected to achieve month on month growth. At the end of the peak season in the fourth quarter, the profit may be slightly lower than that in the third quarter, and the overall profit in the second half of this year will exceed that in the first half of the year.

Recently, after longmang Bailey put forward the above-mentioned semi annual performance forecast, each seller's organization also raised the company's profit forecast value in 2021 to varying degrees.

In April, the profit expectation of the seller's institutions was generally around 4 billion yuan. After the disclosure of longmang Baili's interim report, the institutions generally maintained to raise the profit expectation by 1 billion yuan to around 5 billion yuan.

The expected value of UBS Securities and Changjiang Securities reached 5.361 billion yuan and 5.958 billion yuan, corresponding to earnings per share of 2.39 yuan and 2.66 yuan.

According to the closing price of 35.78 yuan on June 16, it is equivalent to 14.97 times and 13.45 times of valuation, which is not high, but the valuation level changes at any time according to the quality of the secondary market environment, and most of them operate within a certain range.

From the perspective of the seller's institutions that have given specific target price since June, the valuation of longmang Bailey is generally in the range of 20 times to 22 times, which means that there is still 20% room for increase compared with the current price.

On the positive side, the current price of longmang Bailey at 35.78 yuan is still lower than the high of 50.33 yuan in February this year, and the following profit trend will continue to grow, which may lead to "poor expectations" in the market.

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