LB Group(SZ:002601) Guotai Junan Securities·2024-08-28 03:31Investment Rating - The report maintains a "Buy" rating for Longbai Group [3][4]. Core Views - The company's Q2 2024 performance met expectations, with significant resource and cost advantages. The ongoing Fengyuan technical transformation project and the new vanadium and scandium materials industrial park project are progressing well [3]. - Due to the EU's anti-dumping measures suppressing titanium dioxide prices, the EPS estimates for 2024-2026 have been revised down to 1.46, 1.88, and 2.36 CNY respectively, from previous estimates of 1.70, 1.89, and 2.37 CNY. The target price has been adjusted to 20.75 CNY, corresponding to a PE of 14.17X for 2024, down from 23.68 CNY [3][4]. Financial Performance - In H1 2024, the company achieved revenue of 13.8 billion CNY, a year-on-year increase of 4.09%, and a net profit attributable to shareholders of 1.721 billion CNY, up 36.40% year-on-year. In Q2 alone, revenue was 6.51 billion CNY, a year-on-year increase of 3.59% but a quarter-on-quarter decrease of 10.75%. The net profit for Q2 was 770 million CNY, up 12.85% year-on-year but down 19.00% quarter-on-quarter [3]. - The gross margin for H1 2024 was 27.59%, an increase of 2.41 percentage points year-on-year, while the net profit margin was 12.41%, up 2.31 percentage points year-on-year. For Q2 2024, the gross margin was 26.75%, down 0.75 percentage points year-on-year and 1.60 percentage points quarter-on-quarter [3]. Industry Insights - The titanium dioxide industry in China had an operating rate of approximately 77.55% in July, a slight decrease of 1.9 percentage points quarter-on-quarter. The production in July was 380,000 tons, a year-on-year increase of 32.6% [3]. - The demand side shows strong external demand, with total titanium dioxide production in China from January to July 2024 reaching approximately 2.69 million tons, a year-on-year increase of 24.1%, with exports accounting for about 42% of total production. Domestic consumption also increased, with apparent consumption of titanium dioxide at approximately 1.62 million tons, up 30.5% year-on-year [3]. Growth Projects - Longbai Group has a titanium dioxide production capacity of 1.51 million tons per year, the largest globally, supported by over 1 million tons of titanium concentrate production capacity. The Fengyuan technical transformation project is ongoing, and the company plans to invest in a new vanadium and scandium materials industrial park, which includes a 2,500 tons/year high-purity vanadium pentoxide project and a 20,000 cubic meters/year vanadium electrolyte project [3].