Huahong Technology(SZ:002645) GOLDEN SUN SECURITIES·2025-05-05 11:28Investment Rating - The report maintains a "Buy" rating for the company [3][5]. Core Views - The company has shown significant improvement in Q1 profits, turning losses into gains, with a revenue of 5.576 billion yuan in 2024, a year-on-year decrease of 19.0%. However, excluding goodwill impairment of 334 million yuan, the operational performance has improved significantly compared to 2023 [1][2]. - The company is positioned as a leader in the recycling resource sector, with strong technical and business integration advantages. The recovery and utilization of rare earth resources present a vast market opportunity, especially as rare earth prices stabilize and production capacity is expected to be released [3][4]. Financial Performance Summary - In 2024, the company achieved a gross margin of 6.6%, an increase of 2.8 percentage points year-on-year, while the net margin was -6.3%, down 3.5 percentage points [2]. - The company reported a net cash flow from operating activities of 90 million yuan in 2024, a decrease of 83.9% year-on-year, primarily due to increased procurement expenses related to the expansion of rare earth recovery and magnetic materials businesses [2]. - For Q1 2025, the company achieved a gross margin of 9.2%, an increase of 8.7 percentage points year-on-year, and a net margin of 2.3%, up 3.7 percentage points year-on-year [2]. Earnings Forecast - The company is expected to achieve a net profit of 129 million yuan in 2025, with projected profits of 231 million yuan in 2026 and 324 million yuan in 2027, reflecting a significant recovery from previous losses [3][4]. - The estimated P/E ratios for 2025, 2026, and 2027 are 33.0, 18.4, and 13.1, respectively, indicating a potential for growth as the market stabilizes [3][4].