Event Overview: The company publishes its 2024 semi-annual report. With 2024H1, 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, a year-on-year increase of 16.35%, after deducting non-attributable net profit of 0.998 billion yuan, an increase of 67.95% year-on-year. Looking at a single quarter, the company achieved operating income of 10.376 billion yuan, an increase of 23.53% and a decrease of 11.40% year on year; achieved net profit of 0.474 billion yuan, up 45.16% month-on-month, up 12.71% year on year; realized net profit without return to mother 0.694 billion yuan, up 128.51% month-on-month and 106.83% year on year, exceeding our previous expectations. 2024Q2

Volume: The company's non-ferrous metal production increased steadily year over year. 2024H1, the company produced 0.1852 million tons of non-ferrous metals (up 5.65% year on year), about 0.0452 million tons of tin metal (up 6.6% year on year); produced 0.0703 million tons of copper metal (up 7.99% year on year); produced 0.0688 million tons of zinc metal (up 4.56% year on year); produced 65 tons of indium ingots (up 42.42% year on year); 621 kg of gold and 82 tons of silver.

Price: 24Q2. Prices of tin, zinc, and copper metals all rose month-on-month, contributing to a significant month-on-month increase in profits.

2024H1, the company's gross margin was 11.93%, +4.35pct; the gross margin of the 2024Q2 company was 12.52%, +1.32pct month-on-month, +5.01pct year-on-year. By product, the gross margin of 2024H1 is about 12.79% of tin ingots, +5.11pct; the gross margin of zinc products is about 37.60%, +3.84pct year on year; and the gross margin of copper products is about 1.69%, -0.67pct year on year. Following changes in major metal prices, 2024Q2, the average closing price of tin futures was 0.264 million/ton, +0.0468 million/ton, the average closing price of zinc futures was 0.0235 million/ton, +0.0025 million/ton month-on-month, and the average closing price of copper futures was 0.0801 million/ton, and the average closing price of copper futures was 0.0801 million/ton, and +0.0106 million/ton month-on-month. 2024Q2, the average processing fee for tin concentrate (40% in Yunnan) was 16,636 yuan/ton, +2,041 yuan/ton; the average processing fee for domestic zinc concentrate was 2,888 yuan/ton, -1,066 yuan/ton; the average price of copper concentrate TC index was 2.67 US dollars/ton, or 22.72 US dollars/ton.

The asset structure continues to improve, and management costs continue to reduce and increase efficiency: As of 24Q2, the company's balance ratio continued to decline from 48.08% in 24Q1 to 45.10%; in 24Q2, the company's period expense ratio was 3.68%, down -1.61% from month to month. Among them, sales/management/ financial/ R&D expense ratios were -0.05/-1.19/-0.45/+0.08pct, respectively, reducing costs and increasing efficiency, and the cost pressure reduction effect was obvious.

Fixed asset scrap disposal dragged down performance: 24H1. The company scrapped fixed assets with a net book value of 0.248 billion yuan, which had an impact on the company's total profit on the 24 H1 consolidated statement of -0.248 billion yuan, and the impact on net profit attributable to shareholders of the parent company -0.211 billion yuan.

Tracking of imported tin ore from Myanmar: From January to July 2024, the physical volume of tin ore imported from Myanmar decreased by about 45% year on year, and the physical volume of tin ore imported domestically decreased by about 26% year on year. The impact of Myanmar's shutdown of production began to reflect a decrease in imports. It is expected that the supply of tin ore will continue to be tight during the year.

Investment advice: The company is a global leader in the tin and indium industry, with excellent resource endowments. In 2023, the company's tin metal share in the domestic tin market was 47.92%, and the global tin market share was 22.92%. Since 2005, the company's tin production has ranked first in the world; the global market share of the company's refined indium production was 4.38%, and the domestic market share was 6.92%, of which native indium had a global market share of about 9.63%, and the domestic market share was about 15.83%.

Currently, supply-side fluctuations on the tin side continue. The decline in supply in Myanmar and Indonesia has exacerbated the tight supply situation. Demand for demand-side electronics is recovering steadily. AI empowerment is expected to accelerate the recovery of electronics demand, compounded by rapid growth in emerging demand such as photovoltaics and new energy vehicles. The tin price center is expected to continue to rise, and the company is expected to benefit deeply. We expect the company's net profit for 2024-2026 to be 1.984/2.325/2.424 billion yuan, respectively. The PE corresponding to August 23, 2024 will be 12X/10X/9X respectively, maintaining the “recommended” rating.

Risk warning: Prices of tin, zinc and copper fluctuate greatly, safety and environmental risks, and downstream demand falls short of expectations.