The production capacity of vanadium products in the mine is expected to expand rapidly

GF Securities Zhou Dexin

　　 1、 With obvious "color" characteristics

G Chengde Vanadium Titanium (600357) Co., Ltd. is located in Chengde City, Hebei Province. The company is mainly engaged in vanadium containing building materials and vanadium products. Chengde Steel Group, a major shareholder, has its own vanadium titanium magnetite mine. In addition, the company's vanadium titanium magnetite blast furnace smelting technology is at the world's advanced level. The company's business has a distinctive "color" feature in the steel sector.

At present, in steel production, adding 0.1% vanadium to structural steel can increase the strength by 10% - 20%, reduce the structural weight by 15-25%, and reduce the cost by 8-10%; Low and micro alloy steel accounts for 80% of the total steel consumption in developed countries, while it is less than 20% in China. With the development of circular economy and conservation oriented society in China, vanadium low-grade alloy steel and vanadium products have a huge growth space.

Titanium and its alloys have excellent properties such as corrosion resistance, high strength, high temperature and low temperature strength, nonmagnetism, good human adaptability, shape memory and superconductivity. They are called "strategic metals" and are widely used in many fields, especially in aerospace. The more developed the national economy is, the more titanium is used.

Combined with its own resources and competitive advantages, the company has formulated the strategy of "three-stage gradient development of vanadium containing steel, vanadium and titanium" with the comprehensive utilization of vanadium and titanium resources as the core, and gradually realized the "three-stage gradient development of vanadium and titanium containing steel, vanadium and titanium" strategy Resource advantages The technological advantages of vanadium and titanium processing of the company are transformed into product advantages, forming large-scale operation of three series of vanadium containing low (micro) alloy steel, vanadium products and titanium products, and improving the competitiveness and share of the company in domestic and foreign markets.

Among the company's main businesses, vanadium products contribute up to 80% of the company's profits. In 2005, the company's net profit was 197 million yuan, among which the vanadium products created 160 million yuan, the net profit per ton of vanadium products was 25000 yuan, and the net profit of 37 million yuan was created by 2.47 million tons of vanadium containing low-alloy steel. The 2.47 million tons of steel contains about 2470 tons of vanadium. Therefore, 2500 tons of vanadium will be directly used for sales and gain more profits than those used for the production of vanadium containing steel.

At present, the development of titanium industry of the company is in the initial stage, focusing on the resource reserve of titanium concentrate and the technical reserve of titanium yellow powder, nano titanium dioxide and titanium alloy materials. With the gradual strengthening of the titanium product market, the company will increase its investment in titanium industry. It is expected that in the next few years Chengde Vanadium Titanium It will become the production base of titanium raw materials in China.

　　 2、 Ore resource reserves will increase significantly and mine resources will be injected into the listed companies

Vanadium titanium magnetite ore in Chengde, where the company is located, is shallow, easy to mine and concentrate, low in cost and excellent in quality. 63% of the ore can be sorted, which belongs to a polymetallic paragenetic ore. Heishan Mine owned by Chenggang Group has 220 million tons of high vanadium iron ore reserves. In the future competition in the steel industry, the importance of raw materials and ores will increase day by day, so the company has increased its resource reserves, on the one hand, it controls the development of its own mines, on the other hand, it actively expands new mines. At present, the output of iron concentrate of Heishan Mine is controlled at 600000 tons, the quantity of purchased external raw ore for processing is 400000 tons, and another 3 million tons of iron concentrate is purchased from the external market at the price of 600 yuan/ton. In terms of new mines, the company has held 50-60% shares of a private mine and a state-owned mine for joint development. The total raw ore reserves of the two mines are 3-4 billion tons.

At present, the Group's assets include coking plant and railway transportation in addition to mines. Based on the current calculation of Heishan Mine, coking plant and railway transportation, the total asset value is 1 billion yuan, with about 5000 employees. Other sidelines are basically separated. It is expected that the Company will probably start to issue additional private offerings to the Group to achieve listing in 2007.

　　 3、 The production capacity of vanadium products and vanadium containing steel will rapidly increase

山 Expansion of vanadium production capacity increased by 4000 tons

The new 1260 blast furnace will produce 60% more vanadium steel, 1.1 million tons more molten iron and 40000 tons more vanadium slag. After the new 100 ton steelmaking furnace is put into operation at the end of the year, the contradiction between the two 100 ton converters that can extract vanadium faster than steelmaking will be solved, and "one for vanadium extraction and two for steelmaking" will be formed. The 40t converter of another steelmaking plant will also be transformed into 80t converter.

At present, the company's vanadium products are mainly 50 ferrovanadium and vanadium pentoxide. After the project is put into production, 80 ferrovanadium and vanadium nitride will be added. The second production line of vanadium has been put into trial production in January this year and put into production in April, with a total production capacity of 8000 tons of vanadium products. The project with raised funds is the third production line, which is expected to be put into production in the fourth quarter. After reaching the capacity, the company's vanadium production capacity will reach 12000 tons.

山 Synchronous expansion of steel production capacity

The operation of the project with raised funds will expand the steel production capacity simultaneously. The company's steel has a competitive advantage among similar long products due to its vanadium content. It is also the only steel factory in China that can produce steel with a diameter of 50 mm. In addition, the company's bars are mainly used for mechanical steel, which is less affected by the construction market. At present, the price is 3400 yuan/ton. It is estimated that it will reach 900000 tons in 2006 and 1 million tons in 2007. As long as molten steel materials are sufficient, it can reach 160-1800000 tons.

　 4、 Valuation and investment advice

Considering the strong uniqueness of the company, if only the PE and PB of the steel industry are compared, the actual value of the company cannot be reflected. The company's vanadium products have obvious characteristics. In combination with the valuation of foreign vanadium stocks, we think it is reasonable to use a price earnings ratio of 15 times for valuation; The relative valuation method and the absolute valuation method (DCF) are used to estimate the company's share price. The reasonable price of the company should be between 5.7-6.7 yuan/share, which is still a distance from the current secondary market share price, reminding investors to pay more attention.