The company published its 2024 semi-annual report. With 2024H1, the company achieved net profit of 0.112 billion yuan, +29.86% year over year; net profit without return to mother of 0.112 billion yuan, +70.74% year over year. On a quarterly basis, with 2024Q2, the company achieved net profit of 0.085 billion yuan, +65.56% YoY and +212.61% month-on-month; net profit of 0.088 billion yuan after deducting non-attributable net profit of 0.088 billion yuan, +130.45% YoY and +263.08% month-on-month.

Comment: Prices of tungsten concentrate, tin, and copper have risen, and mine profits have increased markedly ① Volume: On the mine side, tungsten concentrate production has declined slightly, which is associated with an increase in tin ore production. Among them, 24H1 tungsten concentrate produced 1,792 tons, +5.64% year over year, and associated tin metal (100%) produced 415 tons, +6.28% year over year. In terms of downstream processing, the company increased its market development efforts, and 24H1 hard alloy sales increased year on year. Affected by sluggish demand and price competition in foreign markets, the company's exports of tungsten powder, tungsten carbide powder and thermal spray powder declined year on year. Among them, the 24H1 division sold 618 tons of hard alloy, +20% year over year, sold 1,850 tons of tungsten powder, -16% year over year, and sold 2,495 tons of tungsten carbide powder, -5% year over year. The tool business continued to expand. Ganzhou Aoketai's hard alloy (blade) sales volume was 11.66 million pieces, +23% year over year; hard alloy (bar) sales and bar sales volume was 359 tons, +36% year over year.

② Price: In 24Q2, the company's gross margin increased 2.03 pcts month-on-month to 18.29%. The price of tungsten raw materials rose in 24Q2, and the tungsten concentrate market price increased +17% month-on-month, to 0.145 million/ton, and the company's tungsten ore product profit increased; the associated tin market price was +21% month-on-month, +27%, to 0.263 million yuan/ton; the associated copper market price was +15% month-on-month, +18%, to 0.08 million yuan/ton. The increase in associated tin and copper prices also contributed significantly to profits. Affected by the increase in profits from its own mines, 24Q2's gross margin increased 2.03 pct month-on-month to 18.29%.

Future core focus: Mines benefit from rising tungsten prices and expect the tool business to continue to expand ① Upstream mineral resources are abundant, benefiting from rising tungsten prices. The cost of the company's tungsten ore is low. According to the 2020 mining rights concession income assessment report, the total cost of Taoxikeng tungsten ore, Dayu Shilei tungsten ore, and Huangzhulong tungsten ore tungsten concentrate per ton was 55028.00 yuan/ton, 53547.26 yuan/ton, 61808.76 yuan/ton, and 57122.00 yuan/ton, respectively, fully benefiting from the rise in tungsten prices. As of 2024H1, the company has 6 mining rights mines and 10 prospecting rights, holding 0.0946 million tons of tungsten resources, 0.0176 million tons of tin resources, and 0.0129 million tons of copper resources.

② Seize development opportunities, and the downstream tool sector continues to improve. Ganzhou Aoketai, a wholly-owned subsidiary of the company, has a blade production capacity of 20 million blades. Domestic tungsten carbide blades have broad prospects for development, and the company's tool sector is expected to become an important performance growth point.

Investment advice: As an integrated enterprise in the domestic tungsten industry chain, the mining side benefits from rising tungsten prices, steady growth in hard alloy demand, broad development prospects for the blade sector, and the company's performance can be expected in the future. We expect the company's net profit to be 0.218/0.287/0.358 billion yuan in 2024-2026, respectively, corresponding to the current price. The 2024-2026 PE will be 30/22/18 times in that order, maintaining the “recommended” rating.

Risk warning: Product prices have dropped sharply, raw material prices have fluctuated greatly, and project progress falls short of expectations