Incident: The company released its 2024 semi-annual report on August 23, achieving revenue of 18.78 billion yuan, -17.77% YoY; net profit to mother 0.8 billion yuan, +16.35% YoY; and deducted 1 billion yuan of non-net profit to mother, +67.95% YoY.

Comment:

The rise in tin prices led to an increase in profits. The increase in the company's performance mainly benefited from the rise in tin prices. The average price of tin in Shanghai in the first half of 2024 was 0.251 million yuan/ton, +21.2% year-on-year. The rise in tin prices is mainly affected by positive macroeconomic sentiment and tight supply expectations. In the first half of 2024, the gross profit of the tin business was 1.06 billion yuan, an increase of 46% over the previous year, and the gross profit of the tin business accounted for 47% of the total gross profit. In the first half of 2024, the difference between net profit due to mother and deducted non-net profit was large, mainly due to disposal of assets. The disposal of fixed assets affected the current profit and loss amount of -0.25 billion yuan.

Production and operation improved, and production of major metal products increased year-on-year. In the first half of 2024, the company produced 0.1852 million tons of non-ferrous metals, including 0.0452 million tons of tin (up 6.6% year on year), 0.0703 million tons of copper (up 7.99% year on year), 0.0688 million tons of zinc (up 4.56% year on year), 65 tons of indium (up 42.42% year on year), 621 kg of gold, and 82 tons of silver.

A “Strategic Cooperation Framework Agreement” was signed with PT Tima Indonesia, the fifth largest producer of fine tin in the world. On August 23, 2024, Tin Industry Co., Ltd. issued an announcement to sign a “Strategic Cooperation Framework Agreement” with PT Tima Indonesia.

The framework agreement is valid for 3 years. According to ITA International Tin Association statistics, Tin Industry Co., Ltd. is the world's largest producer of fine tin, and PT Tima is the fifth largest producer of fine tin in the world. The signing of the “agreement” is the basis for the two sides to later sign specific cooperation agreements, which will help the two sides to achieve cooperation in various fields such as business and technology in the future development process, and promote complementary advantages between the two sides.

I am optimistic that tin prices will continue to rise. Supply side: In 2023, Myanmar and Indonesia's tin ore supply accounted for 18% and 18% of global production. In August 2023, Myanmar's Wa State announced the cessation of tin mining. As of now, Myanmar's Wa State has yet to determine when to resume production. Combined with the slow approval process for Indonesia's RKAB in 2024, supply in Myanmar and Indonesia is expected to be tight in 2024. Demand side: 2024 semiconductor sales data picked up year-on-year, with global semiconductor sales +17% year-on-year in the first half of 2024. Continue to be optimistic that tin prices will rise.

Profit forecast, valuation and rating: Maintaining the original profit forecast in 2024, tight supply combined with positive demand, the expectation that tin prices will continue to rise, and the 2025-2026 performance forecast is raised. Net profit for 2024-2026 is estimated to be 2.05/2.52/2.74 billion yuan respectively (up 7%/6% from the previous period in 25-26). The PE corresponding to the current stock price is 11/9/8 times, respectively, maintaining the “increase” rating.

Risk warning: The decline in metal prices exceeds expectations, the risk that tin supply exceeds expectations, and the risk that tin demand falls short of expectations.