CHINA TUNGSTEN HIGHT(SZ:000657) Guotai Junan Securities·2024-09-05 15:37Investment Rating - The report maintains a "Buy" rating for the company [4][5]. Core Views - In Q2 2024, despite the increase in tungsten concentrate prices, the company's overall gross profit still achieved growth, indicating an improvement in performance compared to the previous quarter. Future profit is expected to continue improving with the injection of the Shizhuo Mine and a recovery in manufacturing demand, leading to increased tool sales [3][4]. Summary by Sections Financial Performance - In H1 2024, the company achieved a net profit attributable to shareholders of 147 million yuan, a year-on-year decrease of 39.30%. In Q2 2024, the net profit was 80 million yuan, down 41.62% year-on-year but up 30.16% quarter-on-quarter [4]. - The company adjusted its earnings per share (EPS) forecasts for 2024-2026 to 0.29, 0.41, and 0.51 yuan respectively, reflecting a downward adjustment of 0.11, 0.07, and 0.04 yuan [4]. - The company’s hard alloy product profits declined in H1 2024, with rising R&D and financial expenses contributing to the profit drop. The overall gross profit decreased by approximately 51 million yuan compared to H1 2023 [4]. Market Position and Product Development - The company remains a leader in the tool industry, with a hard alloy production volume of nearly 7,200 tons in H1 2024, maintaining the world's top position. The domestic market share of the "Diamond" brand hard alloy is close to 30%, and the production of CNC blades exceeded 60 million pieces, with a year-on-year increase of over 20% [4]. - The company has developed new coating drill bits suitable for ultra-small diameter packaging substrates and aluminum alloys, achieving a leading technical level domestically. Additionally, high-strength tungsten wire for photovoltaic applications has entered mass production [4]. Price and Valuation - The target price has been adjusted to 9.02 yuan from the previous 12.65 yuan, based on a 22x PE for 2025, considering the company's leading position in CNC/PCB tool production technology [4][5].