Guotai Junan: Maintain "buy" rating for TIANGONG INT'L (00826) due to recovery in demand for new energy vehicles and mould steel.

Guotai Junan released a research report stating that it maintains a "buy" rating on TIANGONG INT'L (00826). Against the backdrop of gradually recovering downstream demand, the company's performance has improved: in the first half of 2024, the company achieved revenue of 2.522 billion yuan, a year-on-year increase of 1%, and achieved a net profit of 210 million yuan, an increase of 18.4% from the second half of 23. With the overall stability of the domestic economy, the bank expects the company's performance in the second half of the year to be relatively stable, and with the establishment of the company's base in Thailand and titanium project, the company's future growth space will further open up. Guotai Junan's main points are as follows: Benefiting from the development of new energy vehicles, the demand for die steel has shown some recovery. Driven by the vigorous development of new energy vehicles in China, the demand for die steel in the country has significantly recovered. In the first half of 2024, TIANGONG INT'L's domestic revenue from die steel was 540 million yuan, a year-on-year increase of 44.1%. The demand brought by new energy vehicles continues to rise, and the company's die steel segment is expected to remain stable. In addition, benefiting from the improvement in domestic and overseas demand, the company's high-speed steel segment revenue increased by 14.2% year-on-year in the first half, the cutting tool segment revenue increased by 3.6%, and the company's die steel segment performance overall recovered. The Thailand die steel project brings new incremental growth. After the completion of the cutting tool project in Thailand, the company's cutting tool production capacity in Thailand has reached 100 million units, and the effectiveness of its overseas layout is beginning to show. The company plans to continue building a 30,000-ton die steel in Thailand and continue to increase investment overseas. The bank expects that after the project is completed, the performance of the company's die steel segment will continue to be released. After TIANGONG INT'L went public, the company's titanium alloy project will accelerate. In the first half of 2024, the company's titanium alloy sales volume increased year-on-year, and the revenue from the titanium alloy segment in the first half was 384 million yuan. Due to the decline in sponge titanium prices and the increase in yield brought about by the company's process improvement, the unit cost of titanium alloy has decreased significantly, with the gross profit margin of the titanium alloy segment increasing by 7.8 percentage points to 39% year-on-year, leading to an increase of 0.06 billion yuan in gross profit of the titanium alloy segment to 1.5 billion yuan. According to the company's announcement, TIANGONG INT'L has been approved by the North Exchange Commission, and the bank expects that after TIANGONG INT'L completes its listing, the development of its 3,000-ton titanium material project will accelerate, possibly speeding up the development of the company's titanium alloy segment.