Guotai Junan released a research report stating that it maintains Tiangong International's (00826) “gain” rating. Against the backdrop of a gradual recovery in downstream demand, the company's performance rebounded: in the first half of 2024, the company achieved revenue of 2.522 billion yuan, up 1% year on year, and realized net profit of 0.21 billion yuan, up 18.4% from the second half of 23. Against the backdrop of the overall stability of the domestic economy, the bank expects the company's performance to be relatively stable in the second half of the year, and with the launch of the company's Thai base and titanium project, the company's future growth space will be further opened up.

Guotai Junan's main views are as follows:

Thanks to the development of new energy vehicles, demand for mold steel has recovered.

Driven by the booming development of domestic new energy vehicles, domestic demand for mold steel has clearly recovered. In the first half of 2024, Tiangong International Mold Steel's domestic revenue was 0.54 billion yuan, up 44.1% year on year. Demand from new energy vehicles continues to rise, and the company's mold steel sector is expected to remain stable. In addition, benefiting from improved domestic and overseas demand, the company's high speed steel segment revenue increased 14.2% year on year in the first half of the year, the company's cutting tool revenue increased 3.6% year on year in the first half of the year, and the company's tool and tool steel sector's overall performance recovered.

Thailand's tool and tool steel project brought new growth.

After the completion of the cutting tool project in Thailand, the company's cutting tool production capacity in Thailand has reached 0.1 billion, and the results of the overseas layout are beginning to show. The company plans to continue to build 0.03 million tons of tool steel in Thailand and continue to increase overseas investment. The bank expects the company's tool and tool steel performance to continue to be released after the project is completed.

After the listing of Tiangong Co., Ltd., the company's titanium alloy project will accelerate.

The company's titanium alloy sales increased year-on-year in the first half of 2024, and the titanium alloy sector achieved revenue of 0.384 billion yuan in the first half of the year. Due to the drop in the price of titanium sponge and the increase in the production rate brought about by the company's process progress, the company's titanium alloy unit cost dropped a lot. The gross margin of titanium alloy increased 7.8 percentage points to 39% year on year, leading to an increase in gross profit of the titanium alloy sector by 0.006 billion yuan to 0.15 billion yuan. According to the company's announcement, Tiangong Co., Ltd. has been approved by the Beijing Stock Exchange. The bank expects that after Tiangong Co., Ltd. completes its listing, its 3,000-ton titanium project will accelerate, and the development of the company's titanium alloy sector may accelerate.