Description of the event

In 2024H1, the company achieved operating income of 17.162 billion yuan, -8.37%; realized net profit of 1.017 billion yuan, +28.47% year-on-year; realized net profit deducted from non-mother of 0.858 billion yuan, +18.93% year-on-year. 2024Q2 achieved operating income of 8.89 billion yuan, +7.52% month-on-month; realized total profit of 1.074 billion yuan, +32% month-on-month; realized net profit of 0.589 billion yuan, +38% month-on-month; realized net profit deducted from non-mother 0.557 billion yuan, or 85.22% month-on-month. The three major sectors resonated, and profits increased sharply from month to month.

Incident comments

Tungsten and molybdenum: As tungsten prices rose, smelting profits recovered, the photovoltaic tungsten wire boom continued, and Q2 profits increased sharply. 2024Q2's tungsten and molybdenum division achieved revenue of 4.73 billion yuan, +17% month-on-month; achieved total profit of 0.89 billion yuan, +64% month-on-month; realized profit margin of 19%, an increase of 6 percentage points month-on-month. (1) The rise in tungsten prices increased profits on the mining side, and the price gradually transferred to the recovery of profits in the smelting process. As tungsten ore resources continue to be tight, the price of tungsten concentrate has risen sharply since this year. 2024H1 Ninghua Xingluokeng, Duchang Jinding, and Luoyang Yulu achieved net profit of 0.112 billion yuan, 0.112 billion yuan, and 0.087 billion yuan respectively, up 18.38%, +89.31%, and +16.92% year-on-year. By increasing the export share of tungsten smelting products, increasing overseas ore procurement, and increasing the utilization rate of in-house production capacity, profits increased dramatically over the same period last year. Looking at the second quarter, on the one hand, the month-on-month increase in the average price of tungsten concentrate led to profit growth in the upstream resource sector. At the same time, APT and tungsten powder prices were gradually transferred in Q2. Profits in the smelting process were repaired and corrected compared to Q1, or one of the reasons for the sharp month-on-month profit recovery in the Q2 tungsten and molybdenum sector. (2) The photovoltaic tungsten wire boom continues, and the competitiveness of cutting tools is prominent. The company achieved sales of 74.3 billion meters of fine tungsten wire in the first half of the year, including 62.8 billion meters of fine tungsten wire for photovoltaics, which more than doubled year-on-year; 2024Q2 achieved sales of fine tungsten wire of about 40.2 billion meters, +18% month-on-month. Xiamen Honglu Tungsten & Molybdenum Company achieved net profit of 0.62 billion yuan in 2024H1, +51% year-on-year. Through differentiated competition, 2024H1's cutting tool product revenue increased by +9% year on year, production and sales volume increased year on year, and gross margin level further increased to about 45% year over year, highlighting profitability.

New energy materials: The share of lithium cobalate structures has increased, boosting the profitability of the sector. The new energy materials sector of 2024Q2 achieved operating income of 3 billion yuan, -9% month-on-month; net profit of 0.13 billion yuan, +16% month-on-month. Cathode material shipments were 0.0204 million tons, -16% month-on-month: of which lithium cobalate was 0.01 million tons, +19% month-on-month; shipments of ternary cathode materials were 0.0104 million tons, -35% month-on-month. Due to the increase in the proportion of lithium cobalate products, the company's net profit per ton of cathode materials was 6,279 yuan, +1,711 yuan/ton compared to the previous month. The first phase of the 0.1 million ton lithium iron phosphate project in Ya'an, Sichuan has been completed and is in the commissioning stage. Lithium cobalate high-voltage technology is leading, which is expected to adapt to the AI scenario's requirements for high energy density, and looks forward to the growth elasticity brought about by the future release of new technology products in the new energy sector.

Rare earth magnetic materials: demand for magnetic materials was repaired month-on-month, and performance was repaired month-on-month. The 2024Q2 rare earth sector achieved revenue of 1.14 billion yuan, +25% month-on-month; achieved total profit of 0.077 billion yuan, +93% month-on-month, with a profit margin of 7%, an increase of 4 percentage points over the previous month. As demand for downstream new energy vehicles, air conditioners, etc. improves, the company's sales volume of magnetic materials may continue to grow. The company's magnetic material sales increased by about 13% year-on-year in the first half of the year. At the same time, although rare earth prices in Q2 showed a downward trend, due to the integration of the China Rare Earth Group in the early stages, the company's upstream business was announced, so it is possible to purchase low-priced raw materials in Q2, causing Q2's profitability to recover somewhat month-on-month.

Real estate: Maintaining a small loss and awaiting further divestment of assets. The real estate sector of 2024Q2 achieved revenue of 0.014 billion yuan, +17% month-on-month, and realized profit of -0.022 billion yuan, further reducing losses compared to 2023Q4. 2024Q1 confirmed an investment income of 0.145 billion yuan due to the completion of the disposal of Chengdu Tengwangge Real Estate and Chengteng Property shares. With the gradual divestment of real estate assets, the drag on the real estate business is expected to shrink further in the future.

Xiamen Tungsten Industry is a technology-driven, multi-business platform company with a long-term strategic vision. It has the potential to grow small and large, and is optimistic about the company's long-term investment value. (1) The invisible king of tungsten resources. Since the Xiamen tungsten industry is currently the largest producer of tungsten concentrate in the listed company, the Guangxi Bobai Judian tungsten mine and Dahutang tungsten mine owned by the company are among the few high-quality mines in China with plans to be put into operation, and the long-term increase in tungsten resources can be expected. (2) Industry leader in deep processing of tungsten. The company innovatively launched the application of photovoltaic tungsten wire busbars, and is still the only manufacturer that can supply large quantities in the current market. The company's tool blades are positioned in the high-end market, leading in the unit price level in the industry. (3) I believe in the power of R&D and motivation. The company has continued to invest in R&D over the years. The 2024H1 R&D cost was 0.745 billion yuan, accounting for 4.3% of revenue, a further increase over the full year of 2023. The company's fixed increase was approved in July. The aim is to strengthen the layout of the entire tungsten industry chain from resources to deep processing, which is expected to further help the advantageous business grow. Optimistic about the bottom configuration value of the Xiamen tungsten industry.

Risk warning

1. The company's production capacity expansion falls short of expectations;

2. Downstream demand falls short of expectations.