Guotou Securities: Tungsten prices continue to rise, focusing on the opportunity for leading tool companies to rise in both price and volume.

Guotou Securities issued a research report stating that the price of tungsten has risen rapidly this year, and in the long term, the tightening supply will support the high-level operation of tungsten prices. The turning point of the leading tool companies in the industry has appeared in 2025Q3, and the performance of industry companies in terms of revenue and profit is trending upwards. Considering the cyclicality of tool prices brought about by the rise in tungsten prices, the advantage of low-priced inventory of leading companies will gradually be reflected in the fourth quarter and beyond. The bank is optimistic about the elasticity of domestic tool industry performance. The main points of view of Guotou Securities are as follows: The price of tungsten has risen rapidly this year, and in the long term, the tightening supply will support the high-level operation of tungsten prices Tungsten is a key raw material for tools, and the prices of tungsten products have continued to rise this year. According to Zhongtung Online, as of December 10, 2025, the prices of black tungsten concentrate, APT, and tungsten carbide powder have increased by 157%, 158%, and 180% respectively compared to the beginning of the year. 80% of the world's tungsten production is concentrated in China, and China has long regarded tungsten metal as a strategic resource. In recent years, China has continued to increase control over tungsten mining resources, resulting in a continuous tightening of supply. With strong demand in emerging sectors such as photovoltaics, military industry, and PCB drilling, the price of tungsten is expected to remain high in the coming years. Domestic tool prices continue to rise, and the year-end adjustments by foreign companies further increase the pricing space for domestic products. The pricing mechanism of domestic tool companies is relatively flexible, and tool prices are closely related to raw material prices. In May, September, and November this year, the industry has experienced waves of price increases. Recently, European, American, Japanese, and Korean brands such as Sandvik, Kennametal, Kyocera, and Sumitomo have successively issued price adjustment notices, which will increase their price system from December 2025 to February 2026. Considering that foreign tool customers are positioned in the mid-to high-end market, the bank believes that the price increases by most foreign brands in this round will strengthen market education, facilitate tool companies and distributors to pass on price increases to end customers, and highlight the cost-effectiveness advantage of domestic products after the price increase by foreign brands. Small and medium-sized tool companies are reducing production and stopping work due to financial pressure, and the market share of leading companies is expected to increase. With the continuous rise in the price of tungsten, some raw material suppliers have already achieved their annual business targets and have slowed down their shipment pace by the end of the year. Some leading tool companies have strong financial strength and have pre-reserved sufficient raw material inventory in this round of price increases, further magnifying their cost advantages. Small and medium-sized tool companies are under great pressure from funds to replenish their raw material inventories, and some have even reduced production and stopped work. More market demand is expected to gather towards leading brands. Taking OKE Precision Cutting Tools as an example, according to its investor communication notes, with the gradual recovery of downstream demand and the need for channel inventory replenishment, the order volume and product unit price for October and November have increased, and shipments have also shown a trend of increasing in quantity and price. Risk Warning: Significant fluctuations in raw material prices; slowing down of manufacturing industry recovery; intensification of industry competition, etc.