Company and Industry Summary Company: Tian Gong International Key Industry: Titanium Alloy and Powder Steel Core Insights and Arguments - Titanium Alloy Demand Surge: The company has signed a contract with Apple for approximately 4,000 tons of titanium alloy, representing a fourfold increase compared to 2025. Total titanium alloy sales are expected to reach 5,000-6,000 tons in 2026, driven by demand from smartphone manufacturers like Apple, Samsung, Xiaomi, and Huawei [2][3]. - Profit Forecast for Titanium Alloy Business: Revenue from the titanium alloy business is projected to reach 1 billion yuan in 2026, benefiting from a decrease in sponge titanium prices to 40,000 yuan per ton. The company has not adjusted its supply prices, leading to an expected net profit margin of 45%, corresponding to a net profit of approximately 450 million yuan [2][3]. - Strong Growth in Powder Steel Business: The sales target for powder steel in 2025 is set at 1,500 tons, with a goal of 3,000 tons in 2026. The growth is primarily driven by nuclear fusion-related projects, including a tender for 1,100 tons of boron steel and deactivation steel. The nuclear fusion market presents significant growth potential [2][5]. - Overall Profitability: The company's core business, excluding titanium alloy, is expected to generate a profit of 350-400 million yuan in 2025, reflecting a year-on-year growth of 10%-15%. Including the titanium alloy business, total profitability is anticipated to exceed 700 million yuan. The acquisition of a 3D printing titanium powder company will further enhance revenue and profit [2][6]. - Commercial Application of Nuclear Fusion Materials: Materials used in nuclear fusion reactors will become consumables that need regular replacement, creating sustained demand and market value growth for material companies. The company is collaborating with research institutions and expects to secure orders by April 2026 [2][7]. - Development in Integrated Die-Casting for New Energy Vehicles: The company is actively developing integrated die-casting in the new energy vehicle sector, collaborating with Tesla's mold manufacturer and other domestic automakers. The performance of powder steel molds has improved significantly, with cost reductions expected to yield substantial market progress in 2026 [2][4][8]. Additional Important Insights - Future Growth Expectations for Powder Steel: The company is optimistic about its powder steel business, forecasting production of 1,800 tons in 2026 at a price of approximately 100,000 yuan per ton, with a net profit margin of around 35%. This could contribute an additional 70-80 million yuan in profit [4][9]. - Valuation Compared to US Peers: Compared to US peers like Carpenter Technology, which has a PE ratio of 40 despite sluggish growth, the company is currently undervalued. It is the leading global producer of tool steel and the only domestic producer with a production and sales volume exceeding 1,000 tons [2][11]. - Overall Investment Value Assessment: The company is seen as a significant investment opportunity due to its short-term contributions from the titanium alloy business and long-term growth potential from powder steel. The current low valuation, combined with market catalysts, makes it a noteworthy target for investment in the machinery sector [2][12].
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