Key takeaway

As a leader in the titanium dioxide industry, the company currently has 1.51 million tons of titanium dioxide capacity and was an early achiever of mass production via both the sulfate and chloride process routes. Looking ahead, to counter the impact of overseas anti-dumping duties and the increasingly intense domestic competition, the company is raising its selfsufficiency rate for upstream titanium ore while accelerating its overseas expansion. For titanium ore, the company is pushing forward with the "Hongge North Mining Area Two-Mine Joint Development" and the "Xujiagou Iron Ore Development" projects. For overseas expansion, the company acquired Venator UK assets in 2025 and is advancing the construction of a production base in Malaysia.

Event

The company released its 2025 annual report and 1Q26 report. In 2025, it achieved revenue of RMB25.988bn, down 5.63% YoY. Net profit attributable to shareholders of the parent company was RMB1.245bn, down 42.61% YoY. In 1Q26, revenue reached RMB7.158bn, up 1.39% YoY and up 9.5% QoQ. Net profit attributable to shareholders of the parent company was RMB187mn, down 72.74% YoY but up 143.50% QoQ.

Quick Take

Titanium dioxide prices fell in 2025, while iron concentrate and new energy product prices and profits improved

1) Titanium dioxide: Affected by weak domestic demand and anti-dumping measures in India, Brazil, and other countries, titanium dioxide prices and spreads continued to decline in 2025. However, the company, as an industry leader, maintained a high operating rate, and its revenue and gross margin saw limited declines. The company's 2025 revenue from this segment was RMB16.857bn, down 11.18% YoY. Titanium dioxide sales volume was 1.2621 million tons, up 0.6% YoY, with an average price of RMB13,400/ton, down 12% YoY. The gross margin was 23.04%, down 8.31 pcts YoY.

2) Iron concentrate: Prices and spreads improved significantly in 2025. The company's 2025 revenue from ironseries products was RMB2.234bn, up 15.04% YoY. Iron concentrate sales volume was 2.9383 million tons, down 2.13% YoY, with an average price of RMB760/ton, up 18% YoY. The gross margin was 57.73%, up 16.92 pcts YoY.

3) Titanium sponge: The gross margin turned negative in 2025, creating a short-term drag on the company's performance. The company's 2025 revenue from this segment was RMB2.546bn, down 3.8% YoY. Sales volume was 67,500 tons, up 0.88% YoY, with an average price of RMB37,700/ton, down 5% YoY. The gross margin was - 0.67%, down 3.78 pcts YoY.

4) New energy materials: In 2025, prices for products such as iron phosphate rose as the downstream lithium battery industry recovered, allowing the company to turn a profit. The company's 2025 revenue was RMB1.208bn, up 31.6% YoY, with lithium iron phosphate sales of 96,000 tons, up 58.93% YoY, and a gross margin of 8.07%, up 14 pcts YoY.

Sulfuric acid price hikes in 1Q26 put short-term pressure on titanium dioxide profits, while India's removal of anti-dumping duties is expected to boost overall demand. According to industry data, the average price of titanium dioxide (tax inclusive) in 1Q26 was RMB13,700/ton, down 5.87% YoY and up 4.71% QoQ, with the price spread down 33.71% YoY and 3.77% QoQ. The sharp increase in sulfuric acid prices in 1Q26 narrowed the titanium dioxide price spread, leading to a YoY decline for the company in 1Q26. Looking ahead, sulfuric acid prices have retreated following export controls, and titanium dioxide profitability has improved. In addition, India, China's largest export destination, removed its anti-dumping duties on Chinese products at the end of 2025, and export data recovered in 1Q26, with exports expected to return to high growth within the year. Furthermore, the low operating rate in the titanium dioxide industry in Q1 indirectly reflects significant operational pressure on small factories, which may slow the pace of new capacity additions and lead to marginal improvement in industry supply and demand.

Investment recommendation: As a leader in the titanium dioxide industry, the company currently has 1.51 million tons of titanium dioxide capacity and was an early achiever of mass production using both mainstream processes, the sulfate and chloride routes. Looking ahead, to counter the impact of overseas anti-dumping duties and the increasingly intense domestic competition, the company is raising its self-sufficiency rate for upstream titanium ore while accelerating its overseas expansion. For titanium ore, the company is pushing forward with the "Hongge North Mining Area Two-Mine Joint Development" and the "Xujiagou Iron Ore Development" projects. For overseas expansion, the company acquired Venator UK assets in 2025 and is advancing the construction of a production base in Malaysia. We estimate the company's 2026-2028 revenue at RMB31.519bn/RMB34.931bn/RMB39.002bn, up 21.4%/10.8%/11.7% YoY respectively, and net profit attributable to shareholders of the parent company at RMB1.506bn/RMB2.200bn/RMB2.838bn, up 20.98%/46.08%/29.02% YoY respectively. The current share price corresponds to PEs of 26.6x/18.2x/14.1x. We assign a 24x PE for 2027, with a target price of RMB21.75, and maintain a "buy" rating.

Risks:

(1) Sharp fluctuations in raw material prices: Significant raw material price volatility can affect price spreads and earnings stability, such as the recent sulfuric acid price hike, thereby impacting the company's profitability;

(2) Changes in the industry competition landscape: The rapid release of new capacity may lead to partial overcapacity in the titanium dioxide sector, intensifying industry competition and squeezing profit margins;

(3) Macroeconomic fluctuations and global economic downturn: Downstream demand for titanium dioxide is broad and highly correlated with the macroeconomy, and an economic downturn may affect product demand;

(4) Uncertainty in export demand due to potential trade policy changes such as tariffs and a nti-dumping duties: China has a large export volume of titanium dioxide, and trade barriers imposed overseas may affect export demand.