Event: The company released its 2024 mid-year report, and the company's profit increased significantly. In the first half of 2024, the company's revenue was 17.162 billion yuan, -8.37% year over year; net profit to mother was 1.017 billion yuan, +28.47% year over year; net profit after deducting non-return to mother was 0.858 billion yuan, +18.93% year over year. The company's profits have increased significantly.

The performance of the tungsten and molybdenum sector grew rapidly. Tungsten mines benefited from the price increase of tungsten concentrate and rapid profit growth, the rapid expansion of photovoltaic tungsten wire production, and rapid profit growth. From January to June 2024, the company's overall tungsten and molybdenum business improved. The main deep processing products maintained a steady development trend. The tungsten and molybdenum business achieved operating income of 8.781 billion yuan, an increase of 10.98% over the previous year; the total profit was 1.427 billion yuan, an increase of 29.50% over the previous year. Excluding the impact on the investment income of the company's joint ventures, the company's tungsten and molybdenum business profit increased 27.73% year-on-year. Due to the increase in tungsten concentrate prices in tungsten mines (the average price of domestic black tungsten concentrate from January to June 2024 was 0.1344 million yuan/ton, up 13.04% from the same period in 2023; the average price of APT (88.5%) was 0.1984 million yuan/ton, up 11.02% from the same period in 2023. The company's tungsten mine revenue increased year on year, and profit increased sharply year on year; production of tungsten wire products for photovoltaics expanded rapidly, product quality continued to be upgraded, production sales and profit increased sharply year on year. Sales of fine tungsten wire in the first half of the year were 74.3 billion meters (of which 62.8 billion meters of tungsten wire for photovoltaics were sold).

Integration with China's rare earths led to a decline in the company's rare earth business profit, and the company's rare earth magnetic material sales increased steadily. From January to June 2024, the company's rare earth business achieved revenue of 2.054 billion yuan, a year-on-year decrease of 21.48%; the total profit realized was 0.117 billion yuan, a year-on-year decrease of 23.50%. The main reason is the integration with the China Rare Earth Group. The former holding subsidiary Longyan Rare Earth Company and the former Jinlong rare earth smelting and separation business were no longer included in the scope of the consolidated statement. The profit and revenue attributable to this part of the business declined sharply year on year. Coupled with falling raw material prices and increased industry competition, profits from rare earth deep processing products declined year on year. The company's magnetic material products increased the NEV market and overseas customers, stabilized the share of key customers in the wind power sector. Sales increased 13% year-on-year in the first half of the year, and profitability improved quarterly.

Sales of energy metal products have increased dramatically, but the company's revenue and profit have declined due to falling raw material and product prices and intensifying market competition. From January to June 2024, the company's new energy materials business achieved operating income of 6.3 billion yuan, a year-on-year decrease of 22.43%; total profit of 0.246 billion yuan was realized, a year-on-year decrease of 10.06%. The 3C industry gradually recovered. The company sold 0.0184 million tons of lithium cobalate products, up 29.98% year on year, and the market share was further increased, and the leading position in the industry was stable; ternary material products sold 0.0263 million tons, up 108.59% year on year, and the industry ranking was greatly improved; hydrogen storage alloy sales were 1,860 tons, up 7.53% year on year, continuing to maintain the leading position in the industry. However, due to falling raw material and product prices, market competition intensified, profit margins were squeezed, and overall revenue and profit declined year-on-year.

Investment advice: The price of tungsten concentrate exceeded expectations in the first half of the year, the company's rare earths were not included in the scope of the consolidated report, and competition in the new energy industry intensified. We adjusted the company's profit forecast. The company's revenue for 2024-2026 is 37.351/40.11/43.299 billion yuan, respectively, and net profit to mother is 2.125/2.59/2.977 billion yuan, corresponding to PE 10.65/8.74/7.60 times, maintaining the “buy” rating.

Risk warning: raw material price fluctuations exceed expectations; competition for rare earth permanent magnet materials intensifies; the company's sales strategy affects the company's product sales volume