Tin-copper production has been rising steadily, and indium zinc production has increased dramatically. The total amount of non-ferrous metals produced by the company in the first three quarters of 2024 was 0.2771 million tons, an increase of 4.65% over the same period. Among them, tin was 0.0642 million tons, an increase of 8.81%; copper was 0.105 million tons, an increase of 5.32%; zinc was 0.1064 million tons, an increase of 28.81%, mainly due to equipment maintenance during the same period last year, and indium 95 tons, an increase of 43.94%, mainly due to strong demand for indium in the market, and the company continued to expand indium production and sales efforts.

Revenue declined, and gross margin rose due to rising tin prices. In the first three quarters of 2024, the company achieved revenue of 29.212 billion yuan, a year-on-year decrease of 13.21%, mainly due to the year-on-year decline in the supply chain business scale and the deep processing sector.

2024Q3 achieved revenue of 10.438 billion yuan, a decrease of 3.58%. The company's gross margin for the first three quarters of 2024 was 11.63%, up 3.36pct; in 2024Q3, the company's gross margin was 11.09%, up 1.36pct, mainly due to rising tin and zinc prices. By the end of the third quarter of 2024, the spot tin price was 261,954 yuan/ton, an increase of 16.30%; the price of zinc was 23,485 yuan/ton, an increase of 11.73%.

Expense rates increased during the period, and net profit increased significantly. In the first three quarters of 2024, the company's expenses rate for the period was 4.50%, an increase of 0.61 pct over the same period. Among them, the sales expense ratio was 0.17%, a decrease of 0.04 pct; the management expense ratio was 2.49%, an increase of 0.23 pct; and the R&D cost ratio was 0.94%, an increase of 0.48 pct, mainly due to the company's increased research efforts in prospecting and smelting. The financial expense ratio was 0.90%, a decrease of 0.06pct. The company's non-operating expenses were 0.26 billion yuan, mainly due to the scrapping of invalid assets during the reporting period. Overall, the company achieved net profit of 1.283 billion yuan in the first three quarters of 2024, an increase of 17.18% over the same period. Among them, net profit attributable to mother was 0.484 billion yuan in 2024Q3, an increase of 18.56% over the same period.

Cash flow has improved, and the balance ratio has declined. The company's revenue ratio for the first three quarters of 2024 was 1.1060, up 2.64 pcts; the payout ratio was 1.0278, up 0.73 pcts from the same period. Overall, the net operating cash inflow was 2.499 billion yuan, an increase of 0.543 billion yuan over the previous year; the net outflow from investment activities was 0.272 billion yuan, a decrease of 0.127 billion yuan compared to the previous year. The company's balance ratio at the end of the third quarter of 2024 was 41.79%, down 7.47pct from the end of last year, mainly due to a sharp decrease in short-term loans and long-term loans.

Investment advice: Currently, downstream demand for tin is recovering moderately, and tin prices may be strong in the future. Considering that asset disposal generated a large amount of non-operating expenses during the reporting period, the company's net profit due to mother is estimated to be 1.787, 2.24, and 2.579 billion yuan in 2024-2026, corresponding PE of 14.3, 11.4, and 9.9 times, maintaining a “highly recommended” rating.

Risk warning: disturbances in the resumption of production in Wa State, fluctuations in metal prices, geopolitical risks, macroeconomic risks.