Incident: The company announced its 2024 interim report. 2024H1 achieved revenue of 6.807 billion yuan, up 3.98% year on year; achieved net profit of 0.147 billion yuan, down 39.30% year on year; 2024Q2 achieved revenue of 3.84 billion yuan, up 10.06% year on year, up 29.44% month on month; realized net profit of 0.083 billion yuan year on year, down 41.62% year on year and 30.16% month on month.

Overall downstream demand for 2024H1 was under pressure, and the company's revenue growth was steady, and CNC blade sales increased by more than 20%.

Most of the company's products have procyclical properties. Overall demand has been under pressure since 2024, and the company's revenue has still achieved steady growth. By business, 2024H1 cutting tools and tools achieved revenue of 1.572 billion yuan, an increase of 9.44% over the previous year, with sales of CNC blades exceeding 60 million pieces, an increase of more than 20%; other hard alloys achieved revenue of 1.695 billion yuan, a year-on-year decrease of 5.75%; and refractory metals achieved revenue of 1.221 billion yuan, a year-on-year increase of 16.53%; Powder products achieved revenue of 1.551 billion yuan, a year-on-year increase of 20.79%; trade and equipment achieved revenue of 0.768 billion yuan, a year-on-year decrease of 21.61%.

Rising raw material prices compounded weak demand, putting pressure on the company's profitability. 2024H1's gross margin was 14.91%, down 1.34pp year on year; net profit margin was 2.66%, down 1.62pp year on year. By business, the gross profit margin of 2024H1 cutting tools and tools was 30.94%, down 2.32pp; other hard alloys were 12.66%, down 0.64pp; refractory metals were 8.69%, down 4.33pp; and powder products were 8.61%, up 0.21pp year on year. The cost rate during 2024H1 was 11.66%, up 0.61 pp year over year. 2024Q2 gross profit margin was 15.49%, up 0.11pp year on year, up 1.33pp; net profit margin was 2.63%, down 1.93pp year on year, down 0.08pp from month to month.

Mine injection was gradually implemented, and the company's operating stability was enhanced. In January 2024, the company announced that it intends to acquire 100% of the shares of the mining company Kakizhuyuan Company. Mining companies under the Minmetals Group will gradually be injected into the listed company, which will help improve the company's industrial chain layout, directly enhance the company's performance, and improve the operating stability of listed companies. Tungsten concentrate and downstream hard alloy products are at both ends of the profit smile curve of the tungsten industry chain, and the price of tungsten concentrate directly affects the profits of downstream hard alloy products. After the mine is injected into the listed company, the volatility of Chinatungsten Hi-Tech's performance will be significantly reduced.

Profit forecasting and investment advice. The company's net profit from 2024-2026 is expected to be 0.52, 0.63, and 0.74 billion yuan respectively. The compound net profit growth rate for the next three years will be 15%, maintaining a “buy” rating.

Risk warning: risk of macroeconomic fluctuations, risk of asset injections falling short of expectations, risk of fluctuations in raw material prices.