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Bao titanium (600456): fully benefit from the improvement of the industry’s prosperity and maintain the company’s recommended rating

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Bao titanium (600456): fully benefit from the improvement of the industry’s prosperity and maintain the company’s “recommended” rating

1.

The company released the semi-annual report for 2019, and the company achieved operating income in the first half of the year19.

65 ppm, an increase of 24 in ten years.

42%; net profit attributable to shareholders of listed companies1.

11 ‰, an increase of 225% in ten years; realizing budgetary benefits of zero.

26 yuan, an increase of 225 per year.

06%.

2.

Our analysis and judgment (1) The improvement in performance is due to the increase in the volume and price of titanium materials. The company’s performance has increased significantly, mainly due to the significant increase in the company’s main 北京养生 titanium production and sales and the rise in titanium prices.

According to the reported quantity, the company’s main titanium products output and sales were 10644 respectively.

77 tons, 10170.

10 tons, an increase of 69 over the same period last year.

26%, 75.

44%.

Among them, the reported sales volume of the company’s titanium materials was 6,627.

06 tons, an increase of 14 compared with the same period last year.

32%.

In addition, affected by multiple factors such as market, environmental protection, and supply-side reforms, the domestic titanium industry’s supply and demand structure has been further optimized.

In H1 2019, the prices of sponge titanium and titanium materials continue to rise.

As of June 28, the average price of sponge titanium (Baichuan Yingfu), titanium tube and titanium plate (Asian Metal Network) reached 6.

94 million / ton, 14 million / ton and 11.

360,000 yuan / ton, an increase of 17 over the same period last year.

63%, 33.

84% and 8.

60%.

The increase in the price of sponge titanium and titanium materials and the increase in the company’s production capacity have resulted in the company’s reported gross sales margin of 20.

29%, an increase of 3 per year.

67%.

The gross profit margin for sales in Q2 2019 was approximately 28.

93%, an increase of 14 from the previous quarter.

76%.

(II) The domestic demand for high-end titanium materials will continue to increase in recent years, and the consumption of titanium materials in the aerospace industry has maintained a steady growth.

In 2016-2018, the consumption of titanium materials in the aerospace industry was 8519, 8986, and 10295 tons, respectively, and the growth rates exceeded 24.

15%, 5.

48%, 14.

56%.

The growth of the number of domestic civil aircraft in the next 20 years is expected, and this will drive a significant increase in domestic consumer demand for high-end titanium materials. Baichuan Information estimates that in the next 20 years, the amount of titanium used in the Chinese civil market will reach 30 or more.

As one of the domestic high-end titanium materials manufacturers, the company will fully benefit from the rapid growth of demand for titanium materials in the domestic aerospace industry. 3.

Investment suggestion company is a leading company in the domestic titanium industry, with multiple complete titanium industry production chains.

The company has advanced production technology of high-end titanium alloys, and is a supplier of advanced titanium materials for AVIC.The quality system and product certification can fully benefit from the continuous increase in demand for aerospace titanium materials and the continuous improvement of the prosperity of the titanium industry.

We expect the company’s EPS to be zero in 2019-2020.

58/0.

77 yuan, corresponding to the PE of 40x / 30x in 2019-2020, maintaining the “recommended” level.

4.

Risk warnings 1) The demand for high-end titanium materials is less than expected; 2) The price of titanium sponge is lower; 3) The shutdown of the titanium industry may resume production in the future.