**Core Investment Thesis**

The company's Q2 net profit attributable to shareholders improved sequentially. LB Group Co.,Ltd. reported Q2 2025 revenue of RMB 6.28 billion (down 3.5% YoY, down 11.0% QoQ) and net profit attributable to shareholders of RMB 700 million (down 9.2% YoY, up 1.9% QoQ). Gross margin and net margin reached 24.5% and 11.2% respectively, declining year-over-year but improving quarter-over-quarter. Period expense ratio was 10.9% (up 0.1pct YoY, up 1.0pct QoQ). The year-over-year decline in net profit was primarily due to titanium dioxide price decreases, while the sequential improvement was mainly driven by optimization in sponge titanium and new energy materials businesses.

**Titanium Dioxide Production and Sales Growth in H1 2025, Pricing Under Pressure**

In the first half of 2025, the company's titanium dioxide revenue reached RMB 8.66 billion (down 8% YoY), accounting for 65.0% of total revenue. Production volume was 682,200 tons (up 5% YoY) and sales volume was 612,000 tons (up 2% YoY), with international sales comprising 56.3%. Industry supply loosened further with continuous release of new domestic capacity. Combined with anti-dumping policies in the EU and other regions affecting exports, domestic market competition intensified and prices continued declining. According to Wind data, Q2 2025 average price was RMB 14,308 per ton (down 12% YoY, down 1% QoQ).

**Titanium Concentrate and Iron Concentrate Prices Declined**

In H1 2025, the company's titanium concentrate production was 691,900 tons (down 34% YoY), all for internal use. Iron concentrate sales volume was 1.582 million tons (up 2% YoY). Titanium concentrate prices fluctuated at high levels in the first half of 2025 before declining, with demand under pressure due to falling titanium dioxide prices and reduced operating rates, combined with increased supply from new capacity in Chengde, Xinjiang and other regions. According to Baiinfo, Q2 2025 average price for Panzhihua titanium concentrate (TiO2≥46%) was RMB 1,831 per ton (down 17% YoY, down 11% QoQ). The company is actively advancing the "Joint Development of Two Mines in Hongge North Mining Area" and "Xujiagou Iron Mine Development" projects. Future titanium concentrate capacity will reach 2.48 million tons and iron concentrate capacity will reach 7.6 million tons. According to Wind data, Q2 2025 average iron ore futures settlement price (active contracts) was RMB 713 per ton (down 16% YoY, down 10% QoQ), with weak demand weighing on prices.

**Sponge Titanium Prices Rise, Production and Sales Growth**

In H1 2025, the company's sponge titanium revenue was RMB 1.49 billion (up 13% YoY), accounting for 11.2% of total revenue. Production volume was 36,200 tons (up 9% YoY) and sales volume was 38,700 tons (up 26% YoY). The market continued its recovery trend with cumulative price increases of approximately 10.64% in the first half. Sponge titanium spot supply remained relatively tight, with growing military demand supporting prices. According to Wind data, Q2 2025 average market price for Grade 0 sponge titanium was RMB 50,962 per ton (down 3% YoY, up 9% QoQ).

**New Energy Materials Show Volume and Profit Growth**

In H1 2025, the company's new energy materials revenue was RMB 530 million (up 27% YoY), accounting for 4.0% of total revenue, with gross margin of 12.4% (up 15pct YoY). Iron phosphate production was 45,800 tons (up 64% YoY) and sales were 38,500 tons (up 91% YoY).

**Risk Factors**

Project commissioning below expectations; rising raw material prices; downstream demand below expectations.

**Investment Recommendation**

The company maintains a solid leading position in the titanium dioxide industry, but profitability faces pressure due to weak supply-demand dynamics in titanium dioxide and titanium ore. We revise our 2025-2027 net profit attributable to shareholders forecasts to RMB 29.98/35.05/38.10 billion (from previous RMB 30.06/38.94/39.89 billion), corresponding to EPS of RMB 1.26/1.47/1.60. At current share price, the P/E ratios are 14.0x/12.0x/11.0x. We maintain an "Outperform" rating.