Lubei Chemical's Sales Soar, Titanium Dioxide and Methane Chloride Sales Up Over 30%

In the evening of August 7, Lubei Chemical (stock code: 600727.SH) released the 2024 semi-annual report, the company showed a strong growth trend, which is remarkable. The report shows that the operating income of the company reached 2.815 billion yuan in the first half of the year, which achieved a significant increase of 31.28%. The net profit attributable to shareholders of listed companies soared, reaching 146 million yuan, a year-on-year surge of 1063.27%; After deducting non-recurring gains and losses, net profit still maintained a strong growth momentum, reaching 143 million yuan, a year-on-year growth rate of up to 1,081.8%.

The leap in performance is mainly due to the double increase in sales and prices of the two main products of titanium dioxide and methane chloride. According to the data, in the first half of the year, the average price of titanium dioxide of Lubei Chemical reached 14,008.03 yuan/ton, an increase of 4.73%, and the sales volume climbed to 127,400 tons, an increase of 30.18%, and the sales amount therefore increased to 1.784 billion yuan, an increase of 36.35%. In terms of methane chloride, the average selling price increased slightly by 1.75% to 1,979.51 yuan/ton, but the sales volume increased significantly by 36.7% to 237,400 tons, and the sales amount also increased to 470 million yuan, an increase of 39.08%.

In addition, Lubei Chemical also announced a significant asset sale plan, the company intends to transfer 15% of Jinan City Shizhong District Hairong Small Loan Co., Ltd. to a related party Binzhou Haineng Electrical Automation Engineering Co., Ltd. for a transaction amount of 30.536,775 million yuan. The move aims to further focus on the main business, optimize the company's asset structure, and improve asset liquidity and operational efficiency.

As a leader in the Chemical industry, Lubei Chemical is engaged in the fields of titanium dioxide, methane chloride, fertilizer, cement and salt. Among its core business segments, titanium dioxide business is jointly supported by wholly-owned subsidiaries Jinhai Titanium Industry and Xianghai Technology. With an annual output of more than 200,000 tons of sulfuric acid titanium dioxide production line, Jinhai Titanium occupies a leading position in many fields such as nano titanium white and chemical fiber titanium white. Xianghai Technology is focused on the production and sales of chlorinated titanium dioxide, with an annual capacity of 60,000 tons.

At the same time, Lubei Chemical's Jin Yi Technology also performs well in the field of methane chloride, with an annual capacity of more than 300,000 tons and a market share of 8%, especially in the South China market, where the share of methylene chloride is as high as 70%, becoming an important supplier in the region.

For the significant improvement in the first half of the year, Lubei Chemical said that it was mainly due to three factors: First, compared with the same period last year, the company's operating performance base in the first half of 2023 due to the market downturn provided strong support for this year's growth; Secondly, the company actively grasped the market opportunity, improved the market research and judgment ability and the flexibility of sales strategy, increased sales efforts, and promoted the product sales volume to increase significantly; Finally, with the improvement of the market environment, the price of some of the company's products increased year-on-year, which further increased the company's profit.

In order to focus more on its core Chemical business, Lubei Chemical has recently been active in asset sales.

On the same day, Lubei Chemical officially announced its asset sale plan, announcing that it would transfer 15% of its equity in Jinan Shizhong District Hairong Small Loan Co., LTD. (hereinafter referred to as "Hairong Small Loan") to a related party, with a transaction amount of up to 30.536,775 million yuan. It is worth noting that Haineng is a wholly-owned subsidiary of Lubei Enterprise Group Corporation, the controlling shareholder of Lubei Chemical, making this transaction defined as an affiliated transaction.

The original intention of this divestiture is to highlight Lubei Chemical's main business, strengthen the professional operations of the main business segment, in order to optimize the company's asset structure, improve asset liquidity and operational efficiency. This strategic adjustment has undoubtedly laid a solid foundation for the company's long-term development.

From the financial data point of view, Hairong small loan in 2023 and the first half of 2024 to achieve 25.443 million yuan and 14.9721 million yuan of operating income, net profit reached 7.7288 million yuan and 7.917 million yuan respectively. As of the end of June 2024, the total assets and net assets of Hairong Xiaodai reached 267 million yuan and 211 million yuan respectively, demonstrating its sound financial position.

The transfer of shares in Hairong Xiaodai follows another divestment programme launched by Lubei Chemical last month. Its holding subsidiary Jinyi Technology intends to transfer the 60% equity of Hunan Hengyang Jinyi Technology Co., LTD. (hereinafter referred to as "Hengyang Jinyi") held by the Shandong Property Rights Trading Center. With the completion of this transaction, Jinyi Technology will completely withdraw from Hengyang Jinyi, and Hengyang Jinyi will no longer be included in the scope of the company's consolidated statements.

What is particularly striking is that Lubei Chemical is actively promoting refinancing to increase its main business while divesting non-core assets. The company recently issued a fixed increase plan, plans to issue no more than 70 million shares to specific objects through simple procedures, and raise a total of no more than 300 million yuan. After deducting related expenses, the raised funds will be used for the annual output of 60,000 tons of chlorinated titanium dioxide expansion project.

At present, Lubei Chemical has an annual production capacity of more than 200,000 tons of sulfuric acid process and 60,000 tons of chloride process titanium dioxide. In 2023, the company's titanium dioxide production reached 235,600 tons, accounting for 5.58% of the national total production, ranking fourth in China. Among them, the chlorinated titanium dioxide accounted for 16.51% of the company's total production, accounting for 6.29% of the national chlorinated titanium dioxide production. However, the company is still not satisfied with this, saying that the current production line is not yet able to meet the market demand for high-end rutile titanium dioxide.

With the implementation of the raised capital investment project, Lubei Chemical's chlorination titanium dioxide production capacity will be further improved, and the product structure will be more optimized. This will help the company further consolidate its dominant position in the titanium dioxide cleaner production industry chain, and promote the company to accelerate the construction of a large-scale titanium industry demonstration base that is environmentally friendly, high-end and has wide influence in China.