Matters:

The company released its 2024 semi-annual report. In the first half of the year, the company achieved operating income of 18.775 billion yuan, a year-on-year decrease of 17.77%; net profit to mother of 0.8 billion yuan, an increase of 16.35%; net non-return net interest rate of 0.998 billion yuan, an increase of 67.95%; and net cash flow from operating activities of 1.551 billion yuan, an increase of 13.31% year on year.

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The performance was in line with expectations, and rising tin and copper prices led to increased performance. In the first half of 2024, the average prices of tin ingots, copper and zinc in China were 0.239 million/ton, 0.0746 million/ton, and 0.022 million/ton, respectively, up 15.1%, 9.5%, and 0.2% year-on-year respectively. Among them, the average prices of tin ingots, copper and zinc in the second quarter were 0.262 million/ton, 0.0798 million/ton, and 0.0234 million/ton, respectively, +26.6%, +18%, + 11.5%, +20.9%, +14.8%, and +11.1%, respectively. Due to the increase in tin, copper and zinc prices, the year-on-year decline in the supply chain business scale, and the deep-processing sector, the company achieved operating income of 10.376 billion yuan in the second quarter, -11.40% YoY, +23.53%; net profit to mother of 0.474 billion yuan, +12.71% YoY, +45.16% month-on-month; net profit without return to mother 0.694 billion yuan, +128.51% YoY.

Expenses were generally stable during the period, investment income declined, and losses from disposal of scrapped fixed assets dragged down profits slightly. In the first half of 2024, the company's expenses were basically stable. The total sales expenses, management expenses, R&D expenses and financial expenses were 0.826 billion yuan, or -0.1%, of which R&D expenses were 0.163 billion yuan, +119.8% compared to the same period. This cost was basically offset by a decrease in sales expenses, management expenses and financial expenses. This cost was basically offset by a decrease in sales expenses, management expenses and financial expenses. Among them, sales expenses were 0.029 billion yuan, or -37.09% compared to the same period, mainly due to changes in the scope of the merger Sales operations in the processing sector declined; management expenses were 0.456 billion yuan, -9.4% year-on-year, and financial expenses were 0.178 billion yuan, or -12.8% year-on-year. In addition, the company's investment income - 0.16 million yuan, or -100%, is the investment income from the disposal of part of the subsidiary's shares in the previous period; the company formed non-operating expenses of 0.249 billion yuan, +15,966.89% over the same period, mainly due to the company's scrapping of fixed assets with a net book value of 0.248 billion yuan in damaged, dismantled, obsolete, and unrecoverable assets. The impact on the total profit on the company's consolidated statements was -0.248 billion yuan, and the impact on net profit attributable to mother- 0.211 billion yuan ultimately contributed to the company's net profit not attributable to mother of 0.998 billion yuan in the first half of the year, or +67.95% year-on-year.

The output of the company's main products has been steadily increasing. In the first half of 2024, the company produced 0.1852 million tons of non-ferrous metals, including 0.0452 million tons of tin, +6.6% year on year; 0.0703 million tons of copper, +7.99%; 0.0688 million tons of zinc, +4.56%; 65 tons of indium, +42.42% year on year, plus 621 kg of gold and 82 tons of silver. In the second quarter, the company produced 0.0945 million tons of non-ferrous metals, -0.4%, +4.2%; 0.0228 million tons of tin, +5.6% YoY, +1.8%; 0.0356 million tons of copper, -5.1% YoY, +2.6% month-on-month; 0.0439 million tonnes of zinc ingots, +25.8% YoY, +76.3% month-on-month, silver 33 tons, +23.9% YoY, +3.1% month-on-month.

Domestic tin ingot inventories hit a new low in nearly half a year, and the tin price center is expected to remain high. Since 2024, the average domestic tin price has been 0.2456 million yuan/ton, up 15.6% from the 23-year average price. First, it has benefited from the continuation of Myanmar's Wa State mining ban, and the reduction in imported tin ore intensified shortage expectations; second, Indonesia's quota disruptions continued, and net imports of fine tin may remain low during the year. It is expected that future tin supply will maintain a low growth rate; third, the recovery in the consumer electronics industry is compounded by high demand for photovoltaics and new energy. As of August 23, domestic tin ingot stocks were 10,509 tons, down 277 tons from last week, a record low in nearly half a year. The current tight state of mineral resources has had an impact on the smelting process. It is expected that before the ban on Myanmar's Wa Bang tin mine is lifted, it will be difficult for smelting companies to effectively replenish their raw material stocks. We expect tin to maintain a pattern of short supply in 24-26, and we are optimistic about tin price performance.

Investment advice: Considering the decline in the company's supply chain business scale and the rise in tin and copper prices in the first half of the year, we expect the company's net profit to be 2.108 billion yuan, 2.506 billion yuan, and 2.773 billion yuan respectively. The previous value was (2.085 billion yuan, 2.444 billion yuan, 2.701 billion yuan), with year-on-year increases of 49.7%, 18.9%, and 10.6%, respectively, considering the valuation situation of comparable companies in the same industry. With a price-earnings ratio of 14 times in 2024, the corresponding target price is 17.93 yuan, maintaining a “strong” rating.

Risk warning: (1) Domestic economic recovery falls short of expectations; (2) demand recovery for semiconductors and consumer electronics falls short of expectations; (3) metal prices fluctuate sharply.