Introduction to this report:
The company's tungsten ore construction is progressing steadily, and deep processing businesses such as photovoltaic tungsten wire continue to gain strength. Against the backdrop of a recovery in the manufacturing industry and an upward PV boom, the recovery in demand and the release of production capacity will contribute to the increase in the company's performance.
Key points of investment:
Maintain an increase in holdings rating. In 2023, the company's net profit to mother was about 1,602 million yuan, +10.75% year on year, 2024Q1 about 427 million yuan, -2.95% year on year, and -3.06% month on month. Considering the slow recovery in demand, the 2024/2025/2026 performance is downgraded/increased: EPS for 2024/2025/2026 is expected to be 1.37 (-0.07) /1.66 (+0.01) /1.83 yuan, respectively. Referring to the same industry, the 2024 PE rating will be given 18 times, and the target price will be raised to 24.7 yuan (originally 19.8 yuan) to maintain the increase in holdings.
In 2023, the tungsten and molybdenum business increased, and the new energy materials and rare earth business declined. The total profit of the company's tungsten and molybdenum business in 2023 was 2,348 billion yuan, +61.84% over the same period last year. Among them, photovoltaic tungsten wire has a leading edge in the industry, and sales have surged to 76 billion meters. We are deeply involved in high-end cutting tools, and are expanding overseas, aerospace, drill and other markets. Due to falling raw materials and product prices, the total profit of the new energy materials and rare earth business was 559.144 million, respectively, or -54.98%/-54.54% compared with the same period last year.
2024Q1 Profitability of energy materials and rare earths improved month-on-month, and partial disposal of real estate received investment income.
The tungsten and molybdenum business was dragged down by the smelting process. Total profit was 540 million yuan, -4.59% year-on-year, but sales of photovoltaic tungsten wire increased. Total profits of new energy materials and rare earths were $114/40 million respectively, +2.7%/+21% month-on-month, with sales of cathode materials increasing month-on-month. The real estate business achieved a total profit of 116 million yuan, +143 million over the previous month due to the disposal of shares in Chengdu Tengwangge Real Estate and Chengteng Property.
Resource construction is progressing steadily, and deep processing businesses such as photovoltaic tungsten wire continue to gain strength. The Yau Ma Po tungsten and molybdenum mine may increase tungsten ore production by 3,200 tons (65% WO3) after delivery. Demand for photovoltaic tungsten wire is strong, and construction of the 100 billion meter project is being accelerated. In addition, other projects under construction in the tungsten-molybdenum, cathode, and rare earth sectors are progressing steadily. Against the backdrop of a recovery in demand, the release of production capacity will contribute to increased performance.
Risk warning: Project progress falls short of expectations, market demand falls short of expectations, etc.