Description of the event
The company released the 2023 three-quarter report, achieving operating income of 10.8 billion yuan, -15.36%, +6% month-on-month; net profit of 370 million yuan, -7.05%, +5% month-on-month; and net profit deducted from non-return to the mother of 343 million yuan, -2.19% year-on-year, and +4% month-on-month.
Incident comments
The tungsten and molybdenum sector is running steadily, and Q4 photovoltaic tungsten filament emissions are expected to be significant. The 2023Q3 tungsten and molybdenum sector achieved operating income of 4.47 billion yuan, +5.6% month-on-month; realized total profit of 567 million yuan, +5.6% month-on-month. The company achieved sales volume of 54.6 billion meters of fine tungsten wire products in the first three quarters, +214% year-on-year, and sales revenue increased 178% year-on-year; 2023Q3's fine tungsten wire sales volume was about 20.6 billion meters, which was basically the same over the previous month. Currently, some production lines of the company's 60 billion meter photovoltaic tungsten wire project have been put into production, and the plant has completed completion and acceptance. The new production capacity climbed in the fourth quarter, and photovoltaic tungsten filament shipments are expected to increase significantly from month to month. The sales volume of cutting tool products in the first three quarters was basically the same year on year, and sales revenue increased 8% year on year. The company positioned itself in the middle and high-end, and the unit price of blades increased.
Supply is tight, and tungsten concentrate prices remain high, and deep processing+photovoltaic tungsten wire continues to gain strength. The tungsten and molybdenum sector is expected to become the ballast stone of the company's performance.
Cathode materials were repaired on a month-on-month basis, and the decline in the price of lithium carbonate suppressed profitability. The 2023Q3 energy new materials sector achieved operating income of 5.01 billion yuan, +10.3% month-on-month; realized total profit of 170 million yuan, +13% month-on-month; subsidiary Xiamen Tungsten Xinneng achieved attributable net profit of 148 million yuan, +13.7% month-on-month; and realized deducted non-net profit of 141 million yuan, +9.3% month-on-month. The sales volume of 2023Q3 cathode materials was 21,300 tons, +24.6% over the previous year. Considering the declining trend in lithium prices in Q3, the net profit of a single ton in Q3 was about 0.74 million yuan, down from Q20,100 yuan. The company is actively going overseas and has set up a joint venture subsidiary in France to build a production capacity of 40,000 tons of cathode materials. The first phase of 20,000 tons is expected to be completed for trial production in Q4 2025; the second phase is expected to be completed in Q3 2027, and is expected to enjoy the growth elasticity brought by overseas markets.
Competition for magnetic materials intensified, and profits turned to losses month-on-month. The 2023Q3 rare earth sector achieved operating income of 1,302 billion yuan, -5% over the previous month; realized total profit of -42 million yuan, turning loss over month. In the third quarter, the company achieved magnetic material sales volume of 1998 tons, -4.8% over the previous quarter. The price of praseodymium oxide rebounded steadily around mid-July this year, but competition in the magnetic materials market intensified and product prices declined, which had an impact on the profit of the rare earth sector. The company signed a cooperation framework agreement with China Rare Earth Group in September to form two joint ventures to jointly operate rare earth mines and smelting and separation industries controlled by Xiamen tungsten. Under the policy premise, the joint venture will seek to maintain the recoverable reserves in Fujian Province at 200,000 tons of REO for a long time through the expansion of mining licenses and the application for new licenses; after 2-3 years of cooperation, it will invest in the construction of new separated production capacity of 5,000 to 10,000 tons in Fujian Province. The integration of rare earth resources is expected to help the company jointly develop rare earth resources in Fujian Province. At the same time, the Lao rare earth mine cooperating with Chifeng is actively promoted, which is expected to further strengthen the competitiveness of the company's rare earth magnetic materials sector.
Real estate divestment is progressing actively. The 2023Q3 real estate sector achieved operating income of 31 million yuan, -3.1% month-on-month; total profit of -26 million yuan, reduced losses month-on-month. The company is still actively promoting the divestment of real estate, and it is expected that the drag will gradually ease in the future.
Xiamen Tungsten is a technology-driven, multi-business platform company with a long-term strategic vision. It has the potential to go from small to big. The company plans to increase the production capacity of 100 billion meters of photovoltaic tungsten wire and hard alloy tools by no more than 4 billion yuan and the construction of the Yumapo tungsten and molybdenum mine in Bobai County to further expand high-quality projects and enhance the company's profitability. It is expected to be launched in early 2024. With the gradual improvement of the various sectors of tungsten, molybdenum, cathodes, and rare earth magnets, and as the divestment of the real estate business progresses, the company's performance is expected to gradually be released. Net profit is estimated at 1,582 billion yuan in 2023.
Risk warning
1. The expansion of the company's production capacity fell short of expectations;
2. Downstream demand fell short of expectations.