Summary of Tungsten Industry Conference Call Industry Overview - The tungsten industry is experiencing stable global demand growth at an annual rate of approximately 1.2%, primarily driven by high-end manufacturing sectors such as aerospace and military, consuming about 110,000 tons of pure tungsten annually, equivalent to 220,000 tons of tungsten concentrate [1][3][9] - China dominates global tungsten supply, providing around 80% of the demand, with 2024 native tungsten concentrate production expected to be 133,500 tons, which is insufficient to meet market demand [1][5][27] Key Points on Tungsten Prices - Recent supply-demand changes in the minor metals market have led to a rapid increase in tungsten prices, with 55-degree tungsten concentrate reaching 220,000 yuan per ton and APT prices nearing 330,000 yuan, marking a historical high and an increase of over 50% compared to the average price in 2024 [1][10] - Factors contributing to the price increase include reduced tungsten quotas by the Ministry of Natural Resources, strengthened export controls, significant price hikes in international markets, and increased military demand due to geopolitical conflicts such as the Russia-Ukraine war [1][11][14] Supply Chain Structure - The tungsten industry supply chain consists of upstream (mining, ore dressing, and waste recycling), midstream (tungsten smelting), and downstream (alloy manufacturing) [2] Supply and Demand Dynamics - In 2024, China's total tungsten raw material supply is projected to be approximately 204,700 tons, including 134,700 tons of native tungsten, 60,000 tons of recycled tungsten, and 10,000 tons of imported tungsten concentrate [3][16] - There exists a supply gap of about 10,000 tons in the Chinese tungsten market, with both enterprise and social inventories at historical lows [3][22][23] Military Demand Impact - The military sector's direct and indirect consumption of tungsten is significantly increasing, driven by a large-scale arms race, which is expected to further elevate demand for tungsten products [1][13][15] Recycling and Recovered Tungsten - The use of recycled tungsten materials has increased, with some factories using up to 30% recycled materials in 2024, compared to less than 10% five years ago [1][8] - The growth rate of recycled tungsten production is expected to be around 7-8% in 2025, reaching approximately 60,000 tons [17][19] Regulatory Environment - The Chinese government has intensified efforts to combat the smuggling of scrap metals, which has further tightened market conditions [12] - Strict management of over-extraction has led to cautious behavior among mining companies, impacting current and future native tungsten supply [20][24] Future Outlook - The global demand for tungsten is anticipated to continue rising, particularly due to military spending increases in Europe and other regions, which may lead to sustained price increases [15][41] - The market is expected to remain under supply constraints, with total supply projected to be around 200,000 tons in 2025, while demand is expected to reach approximately 220,000 tons [26][41] Conclusion - The tungsten industry is characterized by a complex interplay of supply constraints, rising demand driven by military needs, and significant price volatility influenced by regulatory actions and geopolitical factors. The outlook suggests continued pressure on supply and potential for further price increases in the coming years.

Group 1: Strategic Metal Pricing and Supply Dynamics - The strategic attributes of metals are increasingly important, with China implementing export controls on key strategic metals, leading to significant price differentiation domestically and internationally. This has resulted in an overall upward trend in domestic strategic metal prices [12][14][51]. - The supply of rare earth materials is tightening due to slowed domestic mining quotas and increased instability in overseas supply. In 2024, China's rare earth production is expected to be 270,000 tons REO, with a year-on-year growth rate dropping from 21% in 2023 to 6% [19][26][52]. - China's dominance in rare earth resources is evident, holding 48.9% of global reserves and 69% of global production in 2024. The concentration of resources is significant, with the top four countries accounting for 86.2% of global reserves [19][21][49]. Group 2: Demand Growth in Key Sectors - The demand for rare earth permanent magnets is expected to grow, driven by the rapid development of electric vehicles, energy-saving motors, and humanoid robots, which are key areas for future growth [52]. - The tungsten market is anticipated to see steady demand recovery, supported by the increasing need for hard alloys and applications in the photovoltaic sector, alongside military demand due to geopolitical tensions [3][5]. - The electronic materials sector is benefiting from advancements in AI technology, which is driving the need for upgraded electronic materials to meet higher performance requirements [7][8]. Group 3: Investment Opportunities in New Materials - The AI technology evolution is creating opportunities for the electronic new materials sector, with a notable recovery trend in the electronic industry expected to accelerate the demand for these materials [7][8]. - The military sector is gradually recovering, with new materials for military applications expected to see increased demand as the aerospace industry continues to evolve [10][11]. - The titanium market is poised for growth due to the ongoing development of the aerospace sector, with increasing orders for domestic aircraft like the C919 [10].

Investment Rating - The report assigns a "Buy" rating for the company, indicating an expected increase of over 15% relative to the CSI 300 index within the next six months [31]. Core Views - The company is expected to experience a turning point in its fundamentals due to potential increases in military demand and military trade opportunities, which could catalyze revenue growth [14]. - The company reported significant losses in 2024, with total revenue of 4.569 billion yuan, a year-on-year decline of 25.29%, and a net loss attributable to shareholders of 327 million yuan [5][6]. - The company has set an ambitious revenue target of 8.7 billion yuan for 2025, reflecting a growth expectation of 90.41% compared to 2024 [15]. Summary by Sections Financial Performance - In 2024, the company achieved total revenue of 45.69 billion yuan, down 25.29% year-on-year, with a net loss of 3.27 billion yuan compared to a profit of 828 million yuan in the previous year [5][6]. - The first quarter of 2025 saw revenue of 6.2 billion yuan, a decrease of 30.06% year-on-year, with a net loss of 1.29 billion yuan, marking a decline of 843.67% [5][6]. Business Segments - The special equipment segment generated revenue of 23.93 billion yuan, a decline of 23.93%, accounting for 52.38% of total revenue [12]. - The superhard materials segment reported revenue of 17.64 billion yuan, down 23.33%, representing 38.6% of total revenue [12]. - The specialized automotive segment's revenue decreased by 3.81% to 4.12 billion yuan [12]. Profitability Metrics - The company's gross margin for 2024 was 15.24%, a decrease of 17.01 percentage points year-on-year, while the net margin was -8.05%, down 21.59 percentage points [8]. - The gross margin for the special equipment segment was 9.61%, down 23.92 percentage points, and for the superhard materials segment, it was 25.88%, down 9.77 percentage points [13]. Future Outlook - The company anticipates a recovery in military demand, which is expected to positively impact its performance in the coming years [14]. - The projected revenues for 2025 to 2027 are 6.872 billion yuan, 8.970 billion yuan, and 10.735 billion yuan, respectively, with corresponding net profits of 279 million yuan, 408 million yuan, and 558 million yuan [16][17].