Core Viewpoint - The company's 1H25 results showed a revenue decline of 7.3% YoY to Rmb2.34 billion, while net profit attributable to shareholders increased by 6.8% YoY to Rmb204 million, aligning with expectations [1]. Financial Performance - Sales volume of high-speed steel, die steel, cutting tools, and titanium alloys experienced mixed results, with declines in high-speed steel (-10.4%), die steel (-5.2%), and cutting tools (-20.4%), while titanium alloys saw a significant increase of 65.2% YoY [1]. - The gross margin for high-speed steel rose by 1.5 percentage points to 15.6%, and for die steel, it increased by 0.5 percentage points to 13.8% due to domestic recovery and rising raw material prices [2]. - Conversely, the gross margin for cutting tools fell by 4.6 percentage points to 28.5% due to high raw material costs and intense price competition, while titanium alloys saw a price drop of 45.1% and a gross margin decline of 14.8 percentage points to 24.2% [3]. Foreign Exchange Impact - Foreign exchange gains increased to Rmb129.7 million in 1H25, attributed to the euro's sharp appreciation against the renminbi, impacting euro-denominated trade receivables [3]. Strategic Trends - The company is focusing on high-end product expansion and organic growth, with expectations for the titanium alloy business to significantly contribute to profits by 2026 [4]. - The firm has upgraded its smelting technology to produce various titanium alloy grades and aims to enhance competitiveness in the titanium alloy sector [4]. - The powder metallurgical products segment is expected to ramp up, with the company exploring new applications and establishing a joint venture to bolster its powder material business [5]. Financial Forecasts - Due to uncertainties in the export business for 2H25, the 2025 attributable net profit forecast has been reduced by 24.3% to Rmb366 million, while a new forecast for 2026 is introduced at Rmb538 million, anticipating growth from the alloy material business [6]. - The stock is currently trading at 17.0x and 11.4x P/E for 2025 and 2026, respectively, with a target price increase of 20% to HK$3.01, reflecting a 2026 P/E ratio of 13.8x and an upside potential of 20.8% [6].