Demand Analysis

KEY DEMAND FACTORS

• Price and Volume – Strong as recent price increase on volume has broken down trend
• Institutions and Mutual Funds – Good as 39% ownership leaves some room for growth
• Inside Ownership – Good since two directors have made significant purchases in 2008
• Short Interest – Good as days to cover is currently about three days

Ratio Comparison

			ACTUALS				3 Year Averages
	2002	2003	2004	2005	2006	2007	Actual	Projection
Valuation
P/E Ratio	-0.5	-12.6	12.2	19.9	19.6	18.5	19.32	14.34
Price to Sales	0.2	0.4	0.9	3.8	4.6	3.8	4.05	3.28
Price to EBITDA	-4.4	4.0	5.2	12.9	11.8	11.1	11.95	9.08
Management Effectiveness
Return on Investment	-23.36	-2.67	7.53	21.06	27.97	21.59	23.54	17.69
Return on Equity	-69.99	-8.22	9.83	27.73	32.01	23.68	27.81	18.09
Financial Condition
Total Debt to Equity	0.12	0.00	0.11	0.09	0.00	0.00	0.03	0.02
Interest Coverage	-2.96	0.31	4.13	47.33	124.06	152.38	107.92	219.13
Profitability
Gross Profit Margin	9.27	13.91	17.68	30.79	39.74	38.20	36.24	40.69
EBITDA Margin	-3.72	10.83	16.80	29.45	38.53	34.19	34.06	36.58
Net Profit Margin	-30.43	-3.39	7.96	20.79	23.77	20.97	21.85	22.83
Dividend
Dividend Yield	0.00	0.00	0.00	0.00	0.00	0.28	0.09	0.38
Payout Ratio	0.00	0.00	0.00	0.00	0.00	0.05	0.02	0.05
Growth
P/E/G							0.23	1.41

COMPARISONS

• Valuation –projected ratios are below past three years indicating conservative model
• Management Effectiveness – these ratios are also conservatively lower
• Financial Condition – projected debt will stay at low level
• Profitability – projections are nearly the same as historical ratios
• Dividend – the small dividend that started last year will continue with low payout ratio
• Growth – projected P/E/G is still very low as the historical ratio is unsustainable

Earnings Projections

Titanium Metals (TIE)
Earnings Model ($M)
	2007	2008E	2009E	2010E	2011E	2012E	Forecast
Revenue
Melted Products	192	211	232	255	281	309	10.0%
Mill Product	952	1,047	1,152	1,267	1,394	1,533	10.0%
Other Titanium	135	142	149	156	164	172	5.0%
Total Revenues	1,279	1,400	1,533	1,679	1,839	2,015	9.5%
Cost of Sales	790	854	922	996	1,075	1,161	8.0%
Gross Profit	489	546	611	683	764	853	11.8%
Less Operating Expense
SGA & Development	69	75	80	87	94	101	8.0%
Total Depreciation & Amort.	41	44	48	52	56	60	8.0%
Total Expenses & Items	110	119	128	139	150	162	8.0%
Other Income & Items Net	18	18	18	18	18	18	0.0%
EBIT	396	445	500	562	632	709	12.4%
- Interest Expenses	3	3	3	3	3	3	0.0%
Pretax Income	394	443	498	560	629	707	12.4%
- Income Taxes	117	133	149	168	189	212
Minority Interest	(9)	(9)	(9)	(9)	(9)	(9)	0.0%
Net Income	268	301	340	383	432	486	12.6%
Tax Rate	29.7%	30.0%	30%	30%	30%	30%
Dividends Paid	14	15	17	18	20	22	10.0%
EBITDA	437	481	540	606	679	761	11.7%
Shares outstanding (000,000's)	163	163	163	163	163	163	0.0%
Diluted Shares outstanding	184	184	184	184	184	184	0.0%
Earnings Per Share
Basic	$1.62	$1.85	$2.09	$2.35	$2.65	$2.99	13.1%
Diluted	$1.43	$1.64	$1.84	$2.08	$2.34	$2.64	13.1%
Source: estimates

ASSUMPTIONS

• Growth forecasts are very conservative for all segments
• Expenses growth will continue to grow at a slower pace than sales
• Debt will stay low

Earnings History

Titanium Metals (TIE)
Annual Income Statements ($M)
	2007	2006	2005	2004	2003	2002	I Yr.	3 Yr.
Revenue
Melted Products	192	226	112	72	57	35	-15.1%	38.6%
Mill Product	952	819	529	364	280	278	16.2%	37.7%
Other Titanium	135	138	109	65	48	53	-2.2%	27.3%
Total Revenues	1,279	1,183	750	502	385	367	8.1%	51.7%
Cost of Sales	790	713	519	413	332	333	10.9%	24.1%
Gross Profit	489	470	231	89	54	34	3.9%	143.2%
Less Expenses & Items
SGA & Development	69	67	54	45	36	43	3.0%	15.4%
Total Depreciation & Amort.	41	34	32	33	37	37	20.5%	7.8%
Total Expenses & Items	110	101	85	78	73	80	8.9%	12.3%
Other Income & (Items) Net	18	53	44	40	25	(5)	-66.2%	-23.9%
EBIT	396	422	189	51	5	(51)	-6.1%	97.4%
- Interest Expenses	3	3	4	12	16	17	-23.5%	-40.7%
Pretax Income	394	418	185	39	(11)	(68)	-5.9%	116.1%
- Income Taxes	117	128	25	(2)	1	(2)	-9.0%	-479.9%
Minority Interest & Acct. Change	(9)	(9)	(5)	(1)	(1)	(46)	-2.3%
Net Income	268	281	156	40	(13)	(112)	-4.7%	88.7%
Tax Rate	29.7%	30.7%	13.2%	-5.5%	-10.7%	2.9%	-3.2%	-275.8%
Preferred Dividends Paid	5	7	12	4
Common Dividends Paid	14	-	-	-	-	-
EBITDA	437	456	221	84	42	(14)	-4.1%	73.1%
Shares outstanding (000,000's)	163	155	131	127	127	126	5.0%	8.6%
Diluted Shares outstanding	184	184	182	145	127	126	0.3%	8.3%
Earnings Per 1,000 Shares
Basic	$1.62	$1.77	$1.10	$0.28	($0.10)	($0.88)	-8.7%	79.4%
Diluted	$1.43	$1.49	$0.79	$0.25	($0.10)	($0.88)	-4.4%	79.9%
Source: Titanium Metals SEC Filings

NOTES

• All segments have shown strong growth
• Expenses have increased at a slower pace than revenues
• Debt has been very low
• Shares have increased at a fairly fast pace

Investor Summary

TITANIUM METALS	NYSE:	TIE
Industrial Metals & Minerals	TARGET:	$26.75

Stock Data			Sales & Earnings	2007A	2008E	2009E
Price 04/04/2008	$18.03		Revenue (MM)	$1.3	$1.4	$1.5
52-Week Range	13.05 - 39.80		EBITDA (MM)	$0.4	$0.5	$0.5
Dividend Yield	0.0%		EPS (diluted)	$1.43	$1.64	$1.84
Capitalization			Value Measures
Shares Outstanding (MM)	162.80		Price/Earnings	18.46	13.43	14.50
Market Capitalization (MM)	$2,935.3		Price/Sales	3.80	2.89	3.32
Debt/Equity	0.00		Price/Book	4.29
Projections			Growth (5 Yr.)	Historical	Projected
12-Month Price Target	$21.96		Earnings	79.9%	13.1%
24-Month Price Target	$26.75		P/E/G	0.23	1.41
Annual Total Return	21.8%

KEY AREAS FOR GROWTH

• Deep Sea Oil Exploration – non-corrosive high strength parts for oil platforms
• Alternative Energy Sources – thermal energy conversion power generation
• Energy Conservation & Efficiency – heat exchangers and turbine engines
• Lightweight Strong Materials – reduce energy costs for aircraft and autos
• Environmental Cleanup & Preservation – for desalination
• Specialty Chemicals – highly refractive pigments and non-corrosive pipes for processing
• Cargo Ships - critical non-corrosive parts
• Other – medical device, dental implants, jewelry, and sporting goods
  

MAJOR RISK

Changes in global tariffs or a major environmental problem could significantly hurt this company.