Description of the event
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 39.398 billion yuan, -18.30% year on year; net profit to mother of 1,602 billion yuan, +10.75% year over year; net profit without return to mother of 1,400 billion yuan, +13.29% year over year. In 2024Q1, the company achieved operating income of 8.27 billion yuan, -16% month-on-month; net profit to mother of 427 million yuan, -3% month-on-month; and realized net profit of 301 million yuan without return to mother, or -10% month-on-month.
Incident comments
Tungsten-molybdenum sector: Strong profits, continuous release of photovoltaic tungsten wire. In 2023, the tungsten and molybdenum sector achieved operating income of 16.463 billion yuan, up 25.10% year on year; realized total profit of 2,348 billion yuan, +61.84% year on year. Excluding the impact of investment income from joint ventures, the company's tungsten and molybdenum business profit increased +57.10% year on year. The strong performance of the tungsten and molybdenum sector is mainly due to the steady development of (1) deep processing, and the continued high increase in photovoltaic tungsten wire shipments. In 2023, sales of fine tungsten wire reached 86.8 billion meters, including sales of photovoltaic tungsten wire of 76 billion meters, a significant increase over the previous year. (2) The price of tungsten concentrate has risen, and mine profits have increased. The 2024Q1 tungsten and molybdenum sector achieved revenue of 4,047 billion yuan, which was basically flat from month to month; total profit was 540 million yuan, -4.59% year-on-year and -20% month-on-month.
Photovoltaic tungsten wire shipments reached a new high in 2024Q1. Sales of fine tungsten wire were 34.1 billion meters, of which photovoltaic tungsten wire was about 30 billion meters, achieving continuous growth over Q4.
Rare earth magnetic materials sector: falling raw material prices compounded increased market competition, putting pressure on profits in 2023. In 2023, the company's rare earth sector achieved revenue of 5.49 billion yuan, -10.59% year-on-year; realized total profit of 144 million yuan, a year-on-year decrease of -54.54%. The 2024Q1 rare earth sector achieved revenue of 912 million yuan, or -42% month-on-month; realized total profit of 40 million yuan, +21% month-on-month. The sharp decline in revenue is mainly due to the fact that the refining and separation business of the atomic company Longyan Rare Earth and the subsidiary Jinlong Rare Earth will no longer be included in the scope of the merger after integration with the China Rare Earth Group. However, benefiting from the rebound in rare earth prices in the first quarter and the continued expansion of the company's downstream magnetic materials business, Q1 rare earth sector profits increased month-on-month.
New energy materials sector: Profits in 2023 are under pressure, and the company continues to enrich its product matrix. In 2023, the company's new energy materials achieved revenue of 17.311 billion yuan, or -39.77% year-on-year; realized total profit of 559 million yuan, or 54.98% year-on-year. In 2023, the company shipped 71,500 tons of cathode materials, of which sales volume of lithium cobalate was about 34,600 tons, +4.16% year over year; sales volume of ternary materials was 37,400 tons, -19.39% year over year. The 2024Q1 Energy New Materials Division achieved revenue of 3.299 billion yuan, -21% month-on-month; realized gross profit of 250 million yuan, -26% month-on-month; realized total profit of 114 million yuan, +3% month-on-month, and realized net profit of 111 million yuan, or -6% month-on-month. Shipments of cathode materials were 24,300 tons, +4% month-on-month, including 15,900 tons of ternary materials, +13% month-on-month, with significant recovery in ternary shipments; 0.84 million tons of lithium cobalate, -15% month-on-month.
Real estate sector: Land divestment in Chengdu was completed, and real estate business losses were drastically reduced year over year. In 2023, the company's real estate business achieved revenue of 135 million yuan, a year-on-year decrease of 25.30%; total profit - 133 million yuan, a year-on-year loss reduction of 303 million yuan.
In 2023, the company completed the transfer of 47.5% of Chengdu Tongji's shares held by the holding subsidiary Xiamen Tengwangge and recovered all principal and interest, totaling 1,256 billion yuan; also signed equity transfer agreements with the acquirer for Chengdu Tengwangge Real Estate and Chengdu Tengwangge Property at the end of the year, and completed equity disposal in 2024Q1, confirming investment income of 145 million yuan.
Xiamen Tungsten Industry is a technology-driven, multi-business platform company with a long-term strategic vision. It has the potential to grow small and large, and is optimistic about the company's long-term investment value. At this point, we emphasize the importance of the following three logics: (1) The invisible king of tungsten resources. The Xiamen Tungsten Industry is currently the largest producer of tungsten concentrate in listed companies. At the same time, the Guangxi Bobai Judian Tungsten Ore and the Taiwai Dahutang tungsten mine owned by the company are among the few high-quality mines in China with plans to be put into operation, and the increase in tungsten resources can be expected in the long term. (2) Industry leader in deep processing of tungsten. The company innovatively launched the application of photovoltaic tungsten wire busbars, and is still the only manufacturer that can supply large quantities in the current market. The company's tool blades are positioned in the high-end market, leading the industry in terms of unit price. In '23, the overseas revenue share of cutting tools has reached 30%. (3) I believe in the power of R&D and motivation. The company has continued to invest in R&D over the years. In 2023, it invested 1,609 billion yuan in R&D, accounting for 4.08% of revenue, an increase of 0.5 percentage points over the previous year. The company uses a division-based management assessment mechanism, implements equity incentives and employee shareholding platform plans for core subsidiaries, and targets the core backbone.
It will help the company continue to grow in the long term and gradually form its unique moat.
Risk warning
1. The company's production capacity expansion falls short of expectations;
2. Downstream demand falls short of expectations.