FIRST SHANGHAI: High-end materials will become the future profit breakthrough point for TIANGONG INT'L (00826), maintaining a "buy" rating.

First Shanghai released a research report pointing out that the domestic market for tool and die steel is stabilizing and rising, and high-end materials will become the profit breakthrough point for Tiangong Int'l (00826) in the future. It is estimated that the revenue forecast for the years 2025/2026/2027 will be 5.24 billion/6.08 billion/6.93 billion RMB respectively, with expected net profits attributable to shareholders of 430 million/600 million/810 million RMB. A target price of 4.38 Hong Kong dollars has been set for the next 12 months, corresponding to a 18 times PE ratio for 2026, representing a 44.56% increase from the current price, and maintaining a buy rating. The report believes that, although Tiangong Int'l is facing pressure on the revenue end, its profit performance is showing counter-cyclical growth. In the first half of 2025, the net profit attributable to shareholders was about 203 million RMB, an increase of approximately 10.4% year-on-year. The recovery of the domestic tool and die steel industry combined with the rise in raw material prices has ultimately offset the short-term pressure in the overseas market, leading to positive growth in revenue and gross profit. First Shanghai expects that powder metallurgy materials will become one of the future profit breakthrough points: in the first half of 2025, sales increased by 66.4% to 589 tons, with a price of 149,000 RMB per ton, significantly higher than ordinary high-speed steel and tool and die steel products. In terms of market expansion and customer cooperation, the company signed a long-term supply agreement with Hengerda New Materials in the first half of the year. Starting from 2026, for the next 5 years, Hengerda New Materials will purchase not less than 100 tons of powder high-speed steel materials for sawing tools from Tiangong each year, totaling not less than 600 tons over five years. This agreement not only provides stable support for the company's future performance, but also further consolidates its market position in the specialized powder high-speed steel segment. Looking ahead, First Shanghai holds an optimistic outlook for the high-end titanium alloy business: the demand for new models from downstream customers is expected to gradually increase next year; meanwhile, the company has achieved phased results in the construction of high-end titanium alloy industries in fields such as aerospace and medical health.