1. More than 100 years of history have created the king of the global tin industry. The predecessor of Yunnan Tin Industry Co., Ltd. can be traced back to the old factory and investment promotion bureau during the Qing Guangxu era. It is a tin-based non-ferrous metals industry chain enterprise with a history of more than 140 years and a mission of development in the new era. The company is the largest tin production and processing enterprise in China. It has rich tin resources and indium resources. Gejiu City in Yunnan Province, where it is located, is known as the world's “tin capital”. Since 2005, the company's tin production and sales volume has been ranked first in the world. According to statistics from the International Tin Industry Association, the domestic/global market share of the company's tin metal in 2023 was 48%/23% respectively, ranking first among the top ten fine tin producers in the world.

2. Tin reserves have continued to decline in recent years, and static storage is relatively low. According to USGS statistics, global tin reserves in 2023 were 4.3 million tons, -7% year-on-year, and have continued to decline since 2021 reserves reached 4.9 million tons. In terms of countries, tin reserves are mainly concentrated in China, Myanmar, Australia, Russia, Brazil, etc. The top five countries in total tin reserves in 2023 will account for 77%, and China will account for 26% of tin reserves, making it the world's largest tin resource country.

3. Downstream demand for tin mainly includes solder, tin chemicals, etc., and downstream construction is recovering. According to ITA data, the global tin consumption structure in 2022 mainly includes solder, tin chemicals, tinplate, lead-acid batteries, tin-copper alloys, and others, accounting for 48%/17%/12%/8%/7%/8%, respectively. Among them, the downstream consumption structure of tin solder mainly includes smart devices, household appliances, automotive electronics, photovoltaic welding belts, and others, accounting for 38%/26%/19%/7%/10%, respectively. According to IDC statistics, global smartphone shipments from January to September 2024 were 0.89 billion units, +6.3% year over year; global semiconductor sales were 445.8 billion US dollars, +18.4% year over year, and the industry bottomed out.

4. The increase in the penetration rate of new energy vehicles and the increase in photovoltaic installations have led to an increase in tin usage. According to Mysteel statistics, the amount of tin used in traditional automobiles is 200-350g/vehicle. Since NEVs use more electronic components, circuit boards and other devices, and NEVs use 600-700g/vehicle, the increase in global NEV penetration rate is expected to drive up tin demand. We expect the corresponding tin demand for automobiles to be 0.0322/0.0343/0.0363 million tons in 2024-2026. Photovoltaic welding tape, also known as tinned welding tape, is used in series and parallel connection of photovoltaic cells, and plays an important role in conductivity and polymerization. The material is mainly composed of alloys such as copper and tin. Considering the decrease in the amount of photovoltaic welding tape used per unit, we expect 0.0263/0.0288/0.0335 million tons of tin for photovoltaics in 2024-2026.

5. Profit forecast and investment suggestions: We expect the company's revenue for 2024-2026 to be 39/41/43.2 billion yuan, respectively, and net profit to mother of 1.79/2.22/2.57 billion yuan, respectively. The corresponding EPS is 1.09/1.35/1.56 yuan/share, respectively. As a leader in the tin industry, the company benefits from scarce tin resources. We are optimistic about the company's long-term development trend, covered for the first time, and gave it a “buy” rating.

Risk warning: risk of large price fluctuations, release from the supply side exceeding expectations, downstream demand falling short of expectations