Core views:

Tungsten and molybdenum materials: integrated layout, the number of new product upgrades will bring steady growth in performance. The company's tungsten and molybdenum division has achieved an integrated layout. According to the company's financial report, resources: Ninghua Xingluokeng, Duchang Jinding, and Luoyang Yulu have a tungsten ore production capacity of about 0.012 million tons. The production capacity of the white tungsten mine in Jianbo is expected to exceed 70%. Deep processing: The gross margin of cutting tools and fine tungsten wire products exceeded 40% in 23 years, and deep-processing products such as hard alloys, cutting tools, and tungsten wire ushered in a release period in 24-26. The sharp increase in the quantity and quality of new products is expected to drive a steady increase in gross margin and profit scale.

Rare earth materials: Magnetic material production capacity continues to expand, and the layout of downstream motors increases added value and opens up room for growth. In the context of carbon neutrality, energy saving is still the main theme, and demand for rare earth permanent magnets will continue to grow. The company's magnetic material production capacity can achieve continuous expansion across cycles (according to the company's financial reports and investor relations activity records, the magnetic material production capacity is expected to increase from 0.003 million tons in '18 to 0.022 million tons in '26); at the same time, with the upgrading of China's industrial structure and equipment updates, industrial motors are expected to usher in a period of rapid growth, or open up room for growth for the company's rare earth materials business.

Battery materials: At the bottom of the industry, profits are expected to reverse, and downstream demand will continue to grow. Battery material prices gradually stabilized in 23-24. According to estimates by the Guangzhou Power Generation Group, new energy vehicles entered a period of deep penetration in 24-26, and global power battery demand grew by more than 35%, which is expected to drive a profit reversal.

The company's battery materials cover mainstream customers in the industry and continue to increase production, and profits are expected to grow steadily.

Profit forecasting and investment advice. The company's 24-26 EPS is expected to be 1.29/1.48/1.64 yuan/share, corresponding to the closing price on 11/1/24, and the 24-26 PE is 16/14/13 times. The company has been deeply involved in metal materials for many years, and all business segments have entered a closed loop spiral phase of increasing R&D investment - product upgrades - increasing profits, and there is plenty of room for future growth. Taking into account the company's comparable valuation of tungsten and molybdenum, rare earths, and battery materials, as well as the company's historical valuation center, the company was given 24 times PE in 24 years, corresponding to a reasonable value of 31.05 yuan/share, maintaining the company's “buy” rating.

Risk warning. The company's new production capacity construction fell short of expectations; raw material prices fluctuated beyond expectations; market demand growth fell short of expectations. The competitive landscape in the market intensified beyond expectations.