J.P. Morgan: LB Group’s third-quarter profit rises 86% year on year: Lower raw material costs restore titanium dioxide margins, but demand remains weak

How much did third-quarter earnings improve?

LB Group’s third-quarter net profit was 537 million yuan, up 86% year on year and broadly in line with JPMorgan’s forecast and market consensus. The bank expects a mildly positive market reaction to the results.
Compared with the second quarter, third-quarter revenue fell from 7.264 billion yuan to 6.75 billion yuan, down 7% quarter on quarter; net profit fell from 657 million yuan to 537 million yuan, down 18% quarter on quarter.
Besides the operating performance of its titanium dioxide business, quarterly earnings were supported by 92 million yuan in investment income, including gains from debt restructuring and income related to bill-discounting fees.

Third-quarter titanium dioxide selling prices were broadly stable, while raw material costs for the sulfate process fell. JPMorgan says that from late July to the end of September, the company’s average operating profit per tonne of sulfate-process titanium dioxide rose by approximately 1000 yuan, and the recovery trend was continuing when the report was published.
Most Chinese sulfate-process titanium dioxide producers recorded substantial losses in the third quarter. The bank believes high-cost producers may continue to cut output, helping titanium dioxide prices stabilize in the short term.
Demand remains under pressure: demand from the coatings and real estate-related industries is weak. If end-user purchases do not keep pace with price increases, operating profit could remain under pressure; the company’s export business could also continue to be adversely affected by tariffs in the European Union and Indian markets.

JPMorgan believes that if the recovery in titanium dioxide operating profit continues into the fourth quarter, the market consensus for full-year 2026 net profit of 1.618 billion yuan may be achievable; declines in prices or margins would make it harder to achieve.
The bank says the company’s operating cash flow remained strong in the first three quarters, reflecting stronger cost discipline. Over the long term, its own titanium resources support its cost advantage, and greater resource self-sufficiency may further reduce titanium ore costs.
JPMorgan rates LB Group overweight, with a price target of 22 yuan, equivalent to 22.8 times forward one-year earnings. Its rationale includes a rebalancing of supply and demand during the industry downturn and the company’s operating cost advantage in titanium dioxide.