Incident: 1/9 The company announced plans to issue shares and pay cash to purchase assets and raise supporting capital and related transactions to acquire 100% of the shares of Shizhuyuan Company held by Minmetals Tungsten Industry and Woxi Mining.

High-quality tungsten ore injection helps the company to integrate the tungsten industry chain and greatly increase profits. The company plans to obtain 100% of Kakizhuyuan Company's shares through fixed increment+cash acquisition. The issuance price of the shares is 7.05 yuan/share. At the same time, the purchase price of the subject matter of this transaction has not yet been determined. 1) High quality resources in the Kakizhuyuan mine: Shizhuyuan's tungsten resource reserves account for more than 30% of the country's tungsten resource reserves, and has the highest industrial mining reserves in the world. Currently, the annual production of tungsten concentrate exceeds 7,000 tons and the annual production of fluorite exceeds 300,000 tons. On the one hand, Kakizhuyuan is one of the main sources of tungsten raw materials for Chinatungsten Hi-Tech (the transaction amount related to Chinatungsten Hi-Tech from January to November 2023 was about 1.36 billion), which helped strengthen resource security after the mine was injected; on the other hand, Kakizhuyuan's own profitability was strong, with a net profit of 395 million in the first three quarters of 2023, which is expected to significantly increase Chinatungsten Hi-Tech's profit after injection. 2) There are still other high-quality tungsten ores to be injected:

Currently, Chinatungsten Hi-Tech has 5 mining resources under the actual controller Minmetals Group. In addition to Shizhuyuan, there are also four companies: Xianglushan Tungsten Industry, Hengyang Yuanjing Tungsten Industry, Xintianling Tungsten Industry, and Yaogangxian Mining. Minmetals has promised to inject the managed mine selection and smelting enterprises into Chinatungsten Hi-Tech when they meet the conditions to avoid competition in the industry. Currently, the five companies have nearly 1.2 million tons of tungsten resources, producing about 25,000 standard tons of tungsten concentrate per year.

3) Upstream tungsten concentrate prices are expected to remain strong: considering that 80% of tungsten ore production is concentrated domestically, and the concentration is further increasing. Future mine supply increases are relatively rigid, and with future manufacturing recovery, downstream hard alloy demand is expected to gradually rise steadily. The increase in the penetration rate of tungsten wire for superimposed photovoltaic cutting is expected to bring incremental demand. It is expected that overall supply and demand in the tungsten industry will be tight. The price of tungsten concentrate is expected to remain strong in the short term, and the medium- to long-term price center is expected to move upward.

With technical optimization, photovoltaic tungsten wire production capacity is expected to be gradually released. The company's 10 billion meter high strength fine tungsten wire project production line for photovoltaics (mainly 36/37 wire diameter) was put into operation last year. Due to the low pass-through rate of fine tungsten wire with a wire diameter of 35, which affects the achievement of production capacity, the company has achieved major technological breakthroughs through continuous improvement of tungsten wire blanks and fine tungsten wire rings. The experimental strength and straight-through rate have exceeded the average level of current market demand. It is expected that production will gradually be mass-produced and delivered as soon as possible.

Profit forecast and investment advice: The company's net profit is expected to be 4.6/69/8.8 billion in 2023-2025. Considering that tungsten ore injection helps improve the layout of the company's tungsten industry chain, it is rated “increase in wealth”.

Risk warning: Risk of downstream demand falling short of expectations, risk of policy changes, risk of supply exceeding expectations.