Tianfeng: Copper & Gold Profit Realized in Q2, Material End Shows Significant Improvement MoM.

Tianfeng released a research report stating that the overall situation of the non-ferrous metal sector in 24H1 is as follows: profit differentiation in the resource end, significant year-on-year growth in the copper and gold sectors, and clear improvement in the material end. In terms of minor metals, antimony, tungsten, and tin continue to strengthen, with varying company profit performances. The supply and demand situation of energy metals continues, with lithium companies under pressure; attention should be paid to relative bottom opportunities. In terms of index performance, the 24H1 non-ferrous metal sector rose by +2.7%, a 6% decrease from Q1 mainly due to the late decline of copper and gold stocks and the drag from the energy metal sector, but still stronger than the Shanghai and Shenzhen 300 Index. The 24Q2 non-ferrous metal sector saw a decrease of -7.3%, weaker than the Shanghai and Shenzhen 300 Index, with slight declines in precious metals and industrial metals, and the largest decrease in energy metals. Precious Metals: Rising gold prices drive significant profit increases for companies, and interest rate cuts are expected to benefit the performance of precious metals in the future. In 2024H1, the precious metal industry achieved total operating income of 148.261 billion yuan, a year-on-year decrease of -8.94%, with an operating income of 79.503 billion yuan in 24Q2, a year-on-year decrease of -8.35% and a quarter-on-quarter increase of +15.63%. The precious metal industry in 2024H1 achieved a net profit attributable to shareholders of 5.822 billion yuan, a year-on-year increase of +62.59%, with a net profit of 3.282 billion yuan in 24Q2, a year-on-year increase of +42.30% and a quarter-on-quarter increase of +27.88%. With the expectation of interest rate cuts in Q2, coupled with geopolitical factors, gold prices continued to rise, driving significant profit growth for companies. Looking ahead, the Federal Reserve's 50bp interest rate cut marks the start of a new round of interest rate cuts. Historically, there is a high probability of precious metal prices rising in the six months following interest rate cuts; furthermore, inflation may rise slightly after interest rate cuts, with the inflation-hedging properties of gold likely to be demonstrated, and there may be further room for gold price increases, driving growth in related company profits. Recommended companies to watch: ZHAOJIN MINING (01818), Zijin Mining Group (601899.SH, 02899), Shandong Gold Mining (600547.SH), Shanjin International Gold (000975, SH), Chifeng Jilong Gold Mining (600988.SH), Hunan Gold Corporation (002155.SZ), Zhongjin Gold Corp., Ltd (600489.SH), CHINAGOLDINTL (02099). Base Metals: Copper and aluminum prices rise significantly, driving sector performance growth. 1) Copper: Rising copper prices have led to overall good performance for companies, with an increase in net profit attributable to shareholders. In 24H1, amid significant fluctuations in the macro environment, triggered by ongoing overseas copper supply tensions, a resonance in China-US PMI indicators, and strengthened expectations of overseas interest rate cuts, copper prices surged, culminating in a historic short squeeze in COMEX copper futures in late May. Subsequently, global PMI weakened, the transmission from mining to smelting would take time, leading to smelters maintaining high production levels, and lackluster demand led to copper price fluctuations and declines, but the overall central level has risen. Recommended companies to watch: Zijin Mining Group (601899.SH/02899.HK), CMOC Group Limited (603993.SH), Jchx Mining Management (603979.SH), CHINFMINING (01258.HK), MMG (01208.HK). 2) Aluminum: In 24H1, aluminum prices mainly fluctuated at high levels, with the macro market sentiment potentially boosted. Before May, prices soared due to positive global macro sentiment and relatively resilient fundamentals; later, prices fell as macro sentiment weakened and destocking was slower than expected. Considering constraints in aluminum electrolysis supply, supply and demand are expected to remain at a good level. Recommended companies to watch: CHINAHONGQIAO (01378), Tianshan Aluminum Group (002532.SZ), Aluminum Corporation Of China (601600.SH), Henan Shenhuo Coal & Power (000933.SZ), Yunnan Aluminium (000807.SZ), Shandong Nanshan Aluminium (600219.SH). Minor Metals: Antimony, tungsten, and tin continue to strengthen, with varying company profit performances. In 2024H1, operating income reached 220.568 billion yuan, a year-on-year decrease of -1.61%. Operating income in 24Q2 was 122.174 billion yuan, an increase of +9.90% year-on-year and +24.17% quarter-on-quarter. Net profit attributable to shareholders in 2024H1 was 10.330 billion yuan, an increase of +25.38%. Net profit in 24Q2 was 6.622 billion yuan, an increase of +94.87% year-on-year and +78.58% quarter-on-quarter. 1) Tin: Overseas tin supply disruptions continued, with tin prices strengthening and driving profit growth for Yunnan Tin Co., Ltd. (000960.SZ) in Q2. 2) Tungsten: Environmental protection and safety inspections initially constrained the operations of mines and smelters, leading to tight raw material supply. While domestic and international end-consumer demand performed averagely, the rise in tungsten prices was obstructed. The price may maintain at high levels, with a greater potential for profit recovery in end products. Companies like China Tungsten and Hightech Materials (000657.SZ) are expected to see profits rise steadily during the economic cycle. 3) Antimony: In Q2, the shortage of foreign ore supply and the impact of domestic environmental inspections led to tight raw material supply and continuous price increases for antimony ingots. The tight supply situation is expected to persist, and the rising price of antimony is supported by solid fundamentals, likely to continue its strong performance in the second half of the year, benefiting companies like Hunan Gold.Corporation(002155.SZ), Tibet Huayu Mining (601020.SH) and other companies bring profit support. Recommended to pay attention to: Yunnan Tin Co., Ltd. (000960.SZ), China Tungsten and Hightech Materials (000657.SZ, covered by mechanical group) , Hunan Gold Corporation(002155.SZ), Zhuzhou Smelter Group(600961.SH).Energy Metals: Supply and demand pattern continues, lithium companies' performance under pressure, focus on relative bottom opportunities. In Q2, domestic sales of new energy vehicles exceeded expectations, driving materials factories to replenish inventory, leading to short-term mismatch between supply and demand. The price of lithium salt rebounded slightly compared to Q1, but with the gradual resolution of environmental issues in Jiangxi and the resumption of production by companies, the lithium salt market experienced a supply-demand imbalance in June, leading to a continued decline in prices following the fluctuations in April and May. In terms of profitability, lithium companies continued to face pressure in Q2, with the lithium sector achieving a net profit attributable to the parent company of -3.71 billion yuan in H1 2024, with a net profit attributable to the parent company of -330 million yuan in Q2, showing some improvement compared to the previous quarter but still not turning a profit. With industry supply expectations in the coming years, the importance of cost and resource advantages of companies will continue to be highlighted. It is recommended to pay attention to Sinomine Resource Group (002738.SZ), Yongxing Special Materials Technology (002756.SZ), Ganfeng Lithium Group (002460.SZ), Zhejiang Huayou Cobalt (603799.SH), Ganzhou Teng Yuan Cobalt New Material (301229.SZ), etc. Rare Earth Magnetic Materials: Negative factors in the first half of the year gradually dissipating, supply and demand experiencing accelerated improvement. In the first half of the year, the industry's revenue and net profit both saw significant decreases due to the decline in rare earth prices. Currently, both the supply and demand sides of the rare earth industry are showing clear signs of improvement, with the supply side mainly benefiting from continued positive impacts such as the "Rare Earth Management Regulations" and the tightening of the second batch of quotas, along with weakening overseas imports; on the demand side, the off-season ends early, and the magnetic material sector enters the traditional peak season in the second half of the year. Additionally, due to low industry inventories resulting from previous price declines, marginal replenishment demand will further drive up rare earth prices. Therefore, the price of praseodymium and neodymium oxide has risen from 379,000 yuan/ton at the beginning of July to 419,000 yuan/ton at the end of August, an increase of 11%. With expectations of further improvement in the future, the focus should be on opportunities for bottom reversal. Upstream resources have gradually digested unfavorable factors such as impairment, and are expected to benefit from price increases; leading companies in the magnetic material sector will also benefit from rising rare earth prices, and are currently at the lower end of historical valuation, with some performance flexibility. It is recommended to pay attention to Rare Earth Resources: China Northern Rare Earth (600111.SH), China Rare Earth Resources And Technology (000831.SZ); Magnetic Materials: Yantai Zhenghai Magnetic Material (300224.SZ), Jl Mag Rare-Earth (300748.SZ). Metal New Materials: Significant improvement in Q2 compared to Q1, electronics materials sector in an upswing. Metal New Materials achieved a net profit attributable to the parent company of 2.606 billion yuan in H1 2024, a year-on-year decrease of 25.4%. In Q2, the net profit attributable to the parent company was 1.56 billion yuan, a year-on-year decrease of 10.2%, but a quarter-on-quarter increase of 49.5%. The overall performance of the sector saw a significant improvement compared to the previous quarter, with the electronics materials segment showing an upswing in sentiment. It is recommended to pay attention to POCO Holding (300811.SZ), NBTM New Materials Group (600114.SH), Jiangsu Boqian New Materials Stock (605376.SH), Jiangxi Yuean Advanced Materials (300948.SZ), Qingdao Yunlu Advanced Materials Technology (688190.SH), Ningbo Boway Alloy Material (601137.SH), etc. Risk warning: Systemic risks of global economic recession, risks of lower-than-expected demand, risks of significant increase in upstream supply.