Investment Rating - The report assigns a "Buy" rating to the company [3][5]. Core Views - The company is a global leader in the specialty steel segment, with four synergistic business lines: tool steel, high-speed steel, cutting tools, and titanium alloys [3][20]. - The company has successfully broken the overseas monopoly in powder metallurgy and is positioned to benefit from the growing demand in high-end manufacturing sectors such as robotics and aerospace [19][65]. - The company has a strong focus on R&D, with significant investments aimed at enhancing its competitive edge in high-end materials [35][39]. Summary by Sections Global Specialty Steel Leader - Established in 1981, the company has evolved from cutting tools to high-speed steel, mold steel, and titanium alloys, achieving vertical integration in the high-speed steel cutting tool industry [20][21]. - The company launched China's first large-scale powder metallurgy production line in 2019, becoming the only domestic enterprise capable of large-scale production in this field [20][21]. Powder Metallurgy - The company is tapping into a vast domestic replacement market for powder metallurgy, with applications in aerospace and automotive sectors [2][19]. - Current production capacity for powder metallurgy has reached 5,000 tons, with plans to expand to 10,000 tons [2][66]. - The company has developed a new high-nitrogen steel patent, which is expected to penetrate high-end markets such as aerospace and robotics [2][19]. Titanium Alloys - The company is entering the 3C (computer, communication, consumer electronics) market, leveraging the lightweight and high-strength properties of titanium alloys [2][19]. - Production capacity for titanium alloys has reached 7,000 tons, with plans for an IPO to further expand operations [2][19]. Financial Forecast - The company is projected to generate revenues of 5.1 billion, 5.6 billion, and 6.0 billion yuan for the years 2025, 2026, and 2027, respectively, with corresponding net profits of 464 million, 533 million, and 577 million yuan [3][30]. - The expected price-to-earnings ratios for these years are 11.18, 9.73, and 8.99, indicating strong growth potential [3][30]. Market Perception - The market tends to view the company through the lens of traditional steel manufacturing, overlooking its differentiated competitive advantages in specialty steel [17][18]. - The company is expected to benefit from the structural growth in the specialty steel sector, which is less sensitive to macroeconomic fluctuations compared to traditional steel [18][19].

Financial Performance - The company's revenue for 2024 was approximately RMB 4.83 billion, a decrease of 6.4% compared to RMB 5.16 billion in 2023[3]. - Net profit attributable to shareholders for 2024 was RMB 358.76 million, down from RMB 370.21 million in 2023, resulting in basic earnings per share of RMB 0.131[3]. - The total revenue for the fiscal year 2024 decreased by 6.4% to RMB 4,832,036,000 compared to RMB 5,163,306,000 in 2023[19]. - The company's net profit attributable to equity holders decreased by 3.1% to RMB 358,757,000 in 2024 from RMB 370,209,000 in 2023[38]. - Total comprehensive income attributable to equity holders for 2024 was RMB 271,536,000, down from RMB 349,996,000 in 2023, impacted by foreign currency translation differences and fair value adjustments[55]. - The sales cost for 2024 was RMB 3,848,493,000, a reduction of 4.3% compared to RMB 4,019,922,000 in 2023, due to decreased revenue and related processing costs[40]. - The distribution costs increased to RMB 144,072,000 in 2024 from RMB 118,053,000 in 2023, representing about 3.0% of total revenue[48]. - The company's interest-bearing borrowings increased to RMB 3,284,666,000 as of December 31, 2024, up from RMB 2,895,021,000 in 2023[103]. - The adjusted net debt-to-equity ratio as of December 31, 2024, was 36%, slightly up from 35% in 2023[102]. - The net cash generated from operating activities for the year was RMB 501,762,000, a significant increase from RMB 55,129,000 in 2023, primarily due to stricter control over receivables[103]. Sales and Market Trends - The sales of mold steel, which accounted for 47.1% of total revenue, declined by 3.1% to RMB 2,273,870,000 from RMB 2,345,986,000 in the previous year[23]. - Domestic sales of mold steel increased by 16.2% to RMB 1,008,398,000, while export sales decreased by 14.4% to RMB 1,265,472,000[20][22]. - High-speed steel revenue, representing 17.0% of total revenue, saw a slight increase of 0.7% to RMB 821,478,000 from RMB 815,904,000[24][25]. - Domestic sales of high-speed steel rose by 9.8% to RMB 422,033,000, while export sales fell by 7.4% to RMB 399,445,000[24][26]. - The cutting tools segment, which accounted for 18.2% of total revenue, experienced a 2.9% decline in sales to RMB 879,342,000 from RMB 905,754,000[27][28]. - Domestic sales of cutting tools decreased by 13.6% to RMB 333,274,000, while export sales increased by RMB 26,040,000[27][29]. - Titanium alloy revenue, making up 15.6% of total revenue, dropped by 21.5% to RMB 756,370,000 from RMB 963,836,000[30][31]. - Domestic sales of titanium alloys fell by 21.8% to RMB 747,406,000, while export sales increased by 15.1% to RMB 8,964,000[30][31]. - The demand for high-performance materials in downstream high-end manufacturing sectors, including automotive and aerospace, is driving the growth of special steel, with a continuous increase in production and quality[69]. Research and Development - The company’s R&D expenditure rate exceeded 6% for two consecutive years, with 59 ongoing R&D projects and 16 new initiatives planned for 2025[10]. - The company plans to establish a precision tool research institute to enhance its technological influence and market coverage in high-performance cutting tools[14]. - The company invested RMB 301.55 million in R&D, accounting for 6% of total annual revenue[143]. - The company has applied for 89 patents during the reporting period, including 26 invention patents and 63 utility model patents, with a total of 277 patents held as of the end of 2024[159]. - The company initiated a national key R&D project in collaboration with Tsinghua University and other renowned institutions, focusing on new die-casting mold steel powder metallurgy and additive manufacturing technologies[78]. Product Development and Innovation - The company launched new products including TGE22 and TGE23 large-size die steel for die-casting, which have already been delivered to downstream customers[10]. - The company has made breakthroughs in key technologies related to powder preparation, forming, sintering, and heat treatment, establishing a comprehensive technical system for powder high-speed steel[62]. - The company developed a double-spiral hole hard alloy bar, which is set to enter mass production, optimizing cooling effects and improving processing efficiency for high-performance tools[76]. - The company successfully delivered its first aerospace-grade titanium alloy wire order, meeting high standards and passing strict certification processes[79]. - The company has established a postdoctoral research station in Jiangsu Province, which has been upgraded to a national level, focusing on research in die steel processes and powder metallurgy materials[153]. Sustainability and ESG Initiatives - The company emphasizes green development and resource management, focusing on reducing carbon emissions and optimizing production processes[90]. - The company has implemented measures to mitigate credit risk, including insurance for trade receivables and regular reviews of recoverable amounts[111]. - The ESG report covers the performance of Tian Gong International Limited and its subsidiaries for the fiscal year 2024, from January 1, 2024, to December 31, 2024[122]. - The company is committed to continuous monitoring of greenhouse gas emissions, energy efficiency, and waste management goals[129]. - The group has established a three-tier environmental management system, with five subsidiaries obtaining ISO 14001 certification by the end of 2024[176]. Market Expansion and Global Presence - The company is expanding its global footprint, with the precision tool factory in Thailand increasing production capacity to 12 million units per month[11]. - The company successfully penetrated the North American market with high-quality titanium alloy wire for 3D printing applications, establishing a reputation in the supply chain[34]. - The company has expanded its international presence by adding sales points in Canada and Vietnam, supplying raw materials to well-known enterprises in Europe and the United States[171]. - The company is actively exploring new markets to reduce dependence on any single economy, addressing risks related to global macroeconomic uncertainties[114]. Operational Efficiency - The company has implemented a strict product quality control system to ensure excellence from raw materials to finished products[142]. - The company has integrated various systems such as ERP, MES, and SCADA to optimize production and supply chain management[157]. - The company has streamlined its customer complaint handling process, simplifying issue categorization and conducting monthly reviews of complaints for continuous improvement[172]. - The company has invested in advanced quality inspection equipment, including a thermal expansion deformation testing instrument and a fluorescence spectrometer, to enhance steel performance testing capabilities[163]. Employee and Workforce Management - Employee costs for the year totaled RMB 421,605,000, up from RMB 397,116,000 in 2023, attributed to an increase in employee numbers and salary adjustments[109]. - The company employs 3,527 staff as of December 31, 2024, compared to 3,517 in 2023, maintaining a gender ratio of approximately 73% male to 27% female[109][117]. - The company has conducted regular training on intellectual property protection to enhance employee awareness and prevent infringement of third-party rights[159]. Future Projections and Industry Trends - The integrated die-casting industry in China is expected to reach a market size of RMB 38.9 to 40.5 billion by 2025, with new energy vehicles accounting for RMB 25.8 to 30 billion[93]. - The demand for high-strength, lightweight special steel is expected to continue rising, particularly driven by the rapid development of new energy vehicles and smart cars[91]. - By 2025, the automotive industry is projected to consume approximately 57.5 million tons of steel, with a year-on-year growth of 1.8%[93]. - The global market for high-speed steel cutting tools reached RMB 21.749 billion in 2023, with China's market size at RMB 6.794 billion, projected to grow to RMB 30.995 billion by 2029 at a CAGR of approximately 5.84%[73].

Summary of Conference Call Company Overview - The conference call involved the management team of Tian Gong International, including Chairman Zhu Xiaokun, CEO Zhu Zefeng, Chief Scientist Yu Yang, and CFO Wang Gang, discussing the company's performance and future outlook for 2024 [1][7]. Financial Performance - The company achieved a revenue of approximately RMB 4.832 billion, with a gross profit of RMB 984 million and a net profit of RMB 359 million for the year [2][13]. - Revenue breakdown by business segments: - Mould cylinders: RMB 2.274 billion, gross margin of 12.1% - High-speed cylinders: RMB 821 million, gross margin of 15.2% - Cutting tools: RMB 879 million, gross margin of 30.3% - Titanium alloy business: RMB 756 million, gross margin of 33.5% [2][8][9][10][11]. - Overall revenue decreased by 6.4% year-on-year, primarily due to a slowdown in overseas manufacturing demand [13][14]. Business Highlights - The company is focusing on innovation and R&D, with R&D expenses exceeding 6% of revenue for two consecutive years [3][4]. - The company has 59 ongoing R&D projects, including advancements in powder metallurgy and new titanium alloy products [4]. - The company has successfully developed two integrated large-size mould materials, TG122 and TG123, which have been delivered to customers [5]. Market Dynamics - Domestic sales of mould cylinders increased by 16.2% due to the growth of the domestic electric vehicle industry, while export revenue decreased by 14.4% due to a slowdown in overseas demand [8]. - The high-speed cylinder segment saw a 3.3% increase in sales volume, but average selling prices fell by 2.5% [9]. - The cutting tools segment experienced an 11.2% increase in sales volume, but average selling prices dropped by 12.7% [10]. - Titanium alloy sales volume increased by 9.1%, but average selling prices fell by 28.1% [11]. Strategic Initiatives - The company is committed to enhancing its international presence, with significant investments in Thailand to increase production capacity [5][15]. - A focus on sustainable practices includes providing carbon content values for exported products and advancing energy-efficient projects [6]. - The company plans to invest RMB 400 million in a new high-end titanium alloy production line and RMB 200 million in a precision tool research institute [15]. Future Outlook - The company aims to maintain a high dividend payout ratio of 35% for 2024, reflecting its commitment to shareholder returns [16]. - The management expressed confidence in the company's growth trajectory, with plans for further international expansion and product innovation [7][15]. Additional Insights - The company is exploring new materials and technologies, including the use of nanomaterials and powder metallurgy for enhanced product performance [17][19][29]. - There is a strong emphasis on collaboration with academic institutions for R&D, particularly in high-end steel and titanium alloy applications [26][53]. - The management highlighted the importance of adapting to local market conditions in international operations, particularly in Thailand [50][51]. This summary encapsulates the key points discussed during the conference call, providing insights into the company's financial performance, strategic initiatives, and future outlook.

Core Viewpoint - The global economy in 2024 is facing significant challenges, but companies demonstrating resilience in this environment are increasingly valuable. Tian Gong International (00826) has reported strong performance in its 2024 financial results, indicating positive fundamental changes and potential for a rebound in performance [1] Financial Performance - In 2024, Tian Gong International achieved revenue of 4.832 billion RMB and a net profit attributable to shareholders of 359 million RMB, with operating cash flow increasing significantly to 502 million RMB [1] - The revenue structure shows that mold steel remains the largest source of income, accounting for 47.1% of total revenue, while cutting tools, high-speed steel, and titanium alloys accounted for 18.2%, 17%, and 15.7% respectively [1] Domestic Market Performance - The domestic mold steel business saw a revenue increase of 16.2% to 1.008 billion RMB, driven by both volume and price growth. High-speed steel sales in the domestic market also rose by 9.8% to 422 million RMB [1] - Despite a recovery in the domestic manufacturing sector, sales of cutting tools were 333 million RMB, indicating a bottoming phase due to high inventory levels among distributors. However, sales are expected to improve as inventory is cleared [2] Export and Product Development - Export sales increased by 5% to 546 million RMB, benefiting from strong demand in the North American market and the establishment of a production base in Thailand [2] - The titanium alloy business saw a 9.1% increase in overall sales volume, although prices declined due to product mix effects [2] Strategic Initiatives - Tian Gong International is focusing on creating value for customers by shifting from merely selling products to providing continuous services, forming a positive cycle of demand-driven innovation and service enhancement [3] - The company has increased investments in strategic emerging products and has strengthened technical cooperation with downstream casting enterprises, developing innovative products tailored to market trends [3] Research and Development - R&D expenses accounted for 6.2% of revenue in 2024, maintaining above 6% for two consecutive years, reflecting the company's commitment to innovation [4] - The company has made significant breakthroughs, including the successful delivery of aerospace-grade titanium alloy wire and the successful casting of high-quality titanium ingots, reinforcing its technical advantages in high-end titanium and titanium alloy fields [4][5] Future Outlook - With a focus on high-tech innovation, Tian Gong International is transitioning from a niche player in new materials to a technology-driven group aiming to reshape the global new materials industry landscape [5] - The company's leading technology is expected to be a core driver for stable business growth and global expansion in the future [5]

Financial Performance - Revenue for the year ended December 31, 2024, was RMB 4,832.0 million, a decrease of 6.4% compared to RMB 5,163.3 million in the previous year[2]. - Gross profit for the same period was RMB 983.5 million, down 14.0% from RMB 1,143.4 million[2]. - Net profit attributable to equity holders was RMB 358.8 million, a decline of 3.1% from RMB 370.2 million[2]. - Basic earnings per share decreased by 1.5% to RMB 0.131 from RMB 0.133[2]. - Gross profit margin decreased to 20.4%, down 1.7 percentage points from 22.1%[2]. - Operating profit before tax was RMB 408.1 million, down from RMB 465.5 million in the previous year[3]. - The net profit for the year ended December 31, 2024, was RMB 400,163,000, a decrease of 4.2% compared to RMB 419,928,000 in 2023[4]. - Total comprehensive income for the year was RMB 312,487,000, down from RMB 399,638,000 in the previous year, representing a decline of 21.8%[4]. Assets and Liabilities - Total assets increased to RMB 7,452.7 million, reflecting a growth of 0.9% from RMB 7,384.6 million[2]. - The company's total assets amounted to RMB 8,986,903,000, an increase from RMB 8,160,497,000 in 2023, reflecting a growth of 10.1%[5]. - The total liabilities decreased to RMB 4,298,946,000 from RMB 5,400,578,000, indicating a reduction of 20.5%[6]. - The company's cash and cash equivalents increased to RMB 1,068,922,000 from RMB 749,087,000, showing a growth of 42.7%[5]. - The total equity attributable to the company's shareholders was RMB 7,093,077,000, slightly up from RMB 7,064,555,000 in 2023, indicating a marginal increase of 0.4%[6]. - The company's current liabilities decreased to RMB 3,638,644,000 from RMB 2,817,173,000, representing an increase of 29.1%[6]. - Net debt increased to RMB 2,459.7 million, a rise of 7.4% from RMB 2,289.9 million[2]. - Net asset liability ratio improved to 33.0%, up 2.0 percentage points from 31.0%[2]. Revenue Breakdown - The revenue breakdown by product for 2023 shows that mold steel generated RMB 2,273,870,000, high-speed steel RMB 821,478,000, cutting tools RMB 879,342,000, titanium alloy RMB 756,370,000, and others RMB 100,976,000[13]. - For the fiscal year ending December 31, 2024, the reported segment revenue from external customers is CNY 4,832,036,000, with the highest contribution from the Mould Steel segment at CNY 2,273,870,000[21]. - The Adjusted EBIT for the Mould Steel segment is CNY 24,867,000, while the total Adjusted EBIT across all segments is CNY 523,244,000 for the fiscal year 2024[21]. - The total reported segment assets amount to CNY 10,873,305,000, with the Mould Steel segment holding CNY 5,505,231,000 in assets[21]. - The total reported segment liabilities are CNY 1,459,538,000, with the Mould Steel segment accounting for CNY 668,962,000[21]. Expenses and Costs - Employee costs, including salaries and other benefits, reached RMB 421,605,000 in 2024, compared to RMB 397,116,000 in 2023, representing an increase of about 6.1%[29]. - The net financial cost was RMB 156,963,000 in 2024, up from RMB 138,121,000 in 2023, reflecting an increase of about 13.5%[27]. - Distribution costs for 2024 were RMB 144,072,000, representing approximately 3.0% of revenue, up from 2.3% in 2023[82]. - Administrative expenses increased to RMB 172,675,000 in 2024 from RMB 160,122,000 in 2023, accounting for about 3.6% of revenue[83]. - Research and development expenses decreased to RMB 301,548,000 in 2024 from RMB 312,361,000 in 2023[84]. Dividends and Share Repurchases - The proposed final dividend per share is RMB 0.0263, down from RMB 0.0400 in the previous year, reflecting a decrease of 34.3%[51]. - The interim dividend announced was RMB 0.0203 per share, with no interim dividend declared in the previous year[53]. - A total of 50,000,000 ordinary shares were repurchased at a total cost of HKD 86,829,400 (approximately RMB 78,830,000) as of December 31, 2024[173]. - The repurchased shares were cancelled on July 2, 2024, and November 1, 2024[173]. Market Trends and Outlook - The demand for high-performance special steel has significantly increased due to the rapid development of high-end manufacturing industries such as automotive and aerospace[97]. - The market for high-end materials is experiencing a "volume increase and price decrease" trend, with increased competition leading to price adjustments[95]. - The titanium alloy market is experiencing significant changes, driven by increased demand in high-end manufacturing and technological advancements[106]. - The competition in China's titanium alloy market is intensifying, with state-owned enterprises maintaining advantages in high-end titanium materials[108]. - The global high-speed steel cutting tools market size reached RMB 21.749 billion in 2023, with the Chinese market accounting for RMB 6.794 billion[116]. Corporate Governance and Compliance - The financial statements are prepared in accordance with International Financial Reporting Standards and comply with the relevant regulations of the Hong Kong Stock Exchange[8]. - The group has not adopted any new standards or interpretations that have not yet come into effect during the current accounting period, ensuring consistency in financial reporting[10]. - The audit committee reviewed the annual report and financial statements for the year ending December 31, 2024, confirming compliance with applicable accounting standards[175]. - The company has adhered to the corporate governance principles and rules as per the Hong Kong Stock Exchange regulations[174].

Financial Performance - For the first half of 2024, Tiangong International Company reported a revenue of RMB 2,521,648,000, representing a 1.0% increase from RMB 2,496,411,000 in the same period of 2023[6]. - The overall revenue from the mold steel segment increased by 3.1% to RMB 1,181,417,000, compared to RMB 1,145,497,000 in the first half of 2023[6]. - High-speed steel revenue grew by 14.2% to RMB 436,145,000, up from RMB 381,901,000 in the previous year[9]. - The sales of cutting tools increased by 3.6% to RMB 463,607,000, compared to RMB 447,497,000 in the same period of 2023[6]. - Titanium alloy revenue decreased by 16.6% to RMB 384,832,000, down from RMB 461,239,000 in the first half of 2023[6]. - The net profit attributable to equity holders decreased by 15.7% to RMB 184,371,000 in the first half of 2024, down from RMB 218,700,000 in the same period of 2023[18]. - The overall gross profit margin for the first half of 2024 was 22.1%, compared to 22.8% in the same period of 2023[21]. - The gross margin for mold steel decreased from 16.4% in the first half of 2023 to 13.3% in the first half of 2024[22]. - The overall gross margin for high-speed steel fell from 17.6% in the first half of 2023 to 14.1% in the first half of 2024[23]. - The gross margin for cutting tools increased from 24.6% in the first half of 2023 to 33.1% in the first half of 2024[24]. Market Dynamics - The overall domestic market for mold steel is driven by the growth in the domestic new energy vehicle industry, leading to increased demand for components and integrated die-casting[8]. - The company faces challenges in the export market due to reduced overseas construction investments and intense price competition[8]. - In the first half of 2024, China's industrial output grew by 6%, with high-tech sectors like 3D printing experiencing a remarkable increase of 51.6%[37]. - The industrial output of China's new energy vehicle sector recorded a growth of 34.3%, driven by government policies promoting the upgrade to more environmentally friendly vehicles[37]. - The demand for high-end CNC machine tools is increasing, supported by national policies such as "Made in China 2025" and "Industrial Strong Foundation Project" aimed at developing advanced manufacturing equipment[38]. Operational Efficiency - The company noted that the increase in average selling prices was due to rising procurement costs of raw materials[8]. - Distribution expenses rose by 11.3% to RMB 63,686,000, attributed to increased local and export logistics costs[27]. - Administrative expenses increased by 13.5% to RMB 83,348,000, primarily due to a rise in administrative personnel and bonuses in the titanium alloy division[28]. - R&D expenses decreased from RMB 164,091,000 in the first half of 2023 to RMB 146,994,000 in the first half of 2024, reflecting a reduction in ongoing projects[29]. Investment and Growth Strategies - The company aims to leverage its expertise in equipment, technology, and management to drive innovation in the new materials industry while meeting domestic and international market demands[42]. - The group has established a production capacity of approximately 100 million pieces annually at its overseas factory in Thailand, doubling its cutting tool production capacity[46]. - The group launched China's first large-scale powder metallurgy production line for tool steel in December 2019, marking a significant breakthrough in the high-end market[47]. - The group is committed to optimizing its product structure to meet the growing demand for high-quality special steel in the global market[45]. - The company is actively researching and developing metal powder technologies, including tool steel powder and titanium alloy wire for additive manufacturing, gaining recognition from overseas manufacturers[51]. Environmental and Social Responsibility - The company has invested over RMB 20 million in a large wastewater treatment center and rooftop photovoltaic projects to enhance its environmental, social, and governance performance[52]. - The company emphasizes green development and resource management, aiming to reduce carbon emissions through optimized production processes and recycling of waste materials[52]. - The group is focusing on green development, investing in technology and processes to reduce emissions and respond to national carbon neutrality goals[59]. Shareholder and Corporate Governance - The board declared an interim dividend of RMB 0.0203 per share for the six months ending June 30, 2024, compared to no dividend for the same period in 2023[66]. - The company has complied with the corporate governance code as per the Hong Kong Stock Exchange rules during the reporting period[83]. - The audit committee reviewed the interim financial statements and confirmed compliance with applicable accounting standards[84]. - The company has a stock option plan approved on May 26, 2017, allowing for the grant of options up to 222,008,000 shares, with 162,009,000 options available for grant as of the report date[78]. Financial Position and Cash Flow - As of June 30, 2024, the group's current assets totaled RMB 8,168,738,000, a decrease of 0.6% from RMB 8,217,751,000 on December 31, 2023[56]. - The group's interest-bearing borrowings amounted to RMB 2,727,690,000 as of June 30, 2024, down from RMB 2,895,021,000 on December 31, 2023[56]. - The operating cash flow for the first half of 2024 was RMB 150,229,000, slightly lower than RMB 153,695,000 in the same period of 2023[56]. - The company reported a net increase in cash and cash equivalents of RMB 361,287 thousand for the six months ended June 30, 2024, compared to RMB 11,559 thousand in the same period of 2023, showing significant improvement[98].

Financial Performance - Revenue for the six months ended June 30, 2024, was RMB 2,521.6 million, representing a 1.0% increase from RMB 2,496.4 million in the same period of 2023[2] - Gross profit decreased to RMB 558.5 million, down 1.9% from RMB 569.6 million year-on-year[2] - Profit attributable to equity holders was RMB 184.4 million, a decline of 15.7% compared to RMB 218.7 million in the previous year[2] - Basic and diluted earnings per share were both RMB 0.067, down 15.2% from RMB 0.079 in the same period last year[2] - Total comprehensive income for the period was RMB 207.9 million, compared to RMB 220.2 million in the same period last year[6] - The consolidated profit before tax for the six months ended June 30, 2024, was RMB 222,182 thousand, down from RMB 266,787 thousand in the same period of 2023, indicating a decline of approximately 16.7%[26] - Net profit decreased by 13.2% from RMB 242,338,000 in H1 2023 to RMB 210,239,000 in H1 2024, with a net profit margin of 8.3%[76] - The net profit attributable to equity holders decreased by 15.7% to RMB 184,371,000 in the first half of 2024, down from RMB 218,700,000 in the same period in 2023[61] Assets and Liabilities - Net asset value increased slightly to RMB 7,406.9 million, up 0.3% from RMB 7,384.6 million as of December 31, 2023[2] - Net debt increased to RMB 780.7 million, reflecting a 10.2% rise from RMB 708.7 million[2] - The net debt to equity ratio rose to 10.5%, compared to 9.6% at the end of 2023[2] - Total assets as of June 30, 2024, amounted to RMB 13,422,029 thousand, a decrease from RMB 13,561,075 thousand as of December 31, 2023, representing a decline of about 1.0%[27] - Total liabilities as of June 30, 2024, were RMB 6,015,092 thousand, compared to RMB 6,176,487 thousand as of December 31, 2023, showing a decrease of approximately 2.6%[28] - Non-current assets totaled RMB 5,253.3 million, a decrease from RMB 5,343.3 million as of December 31, 2023[7] - Total liabilities for reportable segments decreased to RMB 1,484,855 thousand in 2024 from RMB 1,599,014 thousand in 2023, indicating a reduction of about 7.1%[19] Revenue Breakdown - The total revenue for the first half of 2024 reached RMB 2,703,427 thousand, an increase from RMB 2,626,561 thousand in the same period of 2023, representing a growth of approximately 2.9%[23] - The revenue from the Mould Steel segment was RMB 1,181,417 thousand in 2024, up from RMB 1,145,497 thousand in 2023, indicating a growth of about 3.1%[16] - The revenue from the High-Speed Steel segment increased to RMB 436,145 thousand in 2024, compared to RMB 381,901 thousand in 2023, reflecting a growth of approximately 14.2%[16] - The Cutting Tools segment generated revenue of RMB 463,607 thousand in 2024, slightly up from RMB 447,497 thousand in 2023, showing a growth of about 3.6%[16] - The Titanium Alloy segment reported revenue of RMB 384,832 thousand in 2024, down from RMB 461,239 thousand in 2023, representing a decline of approximately 16.6%[16] - Revenue from tool steel reached RMB 1,181,417,000 for the first half of 2024, representing a 3.1% increase from RMB 1,145,497,000 in the same period of 2023[48] - Domestic sales of tool steel increased by 44.1% year-on-year to RMB 540,024,000, up from RMB 374,722,000 in the first half of 2023[50] Expenses and Costs - Cost of goods sold for the six months ended June 30, 2024, was RMB 1,963,178, compared to RMB 1,926,849 for the same period in 2023, reflecting an increase of 1.9%[34] - Distribution expenses rose by 11.3% to RMB 63,686,000 in H1 2024, driven by increased local and export transportation costs[71] - Administrative expenses increased by 13.5% to RMB 83,348,000 in H1 2024, attributed to a rise in administrative personnel and bonuses in the titanium alloy division[72] - R&D expenses decreased from RMB 164,091,000 in H1 2023 to RMB 146,994,000 in H1 2024 due to fewer ongoing projects[73] - Net finance costs reduced from RMB 81,781,000 in H1 2023 to RMB 75,973,000 in H1 2024, influenced by lower average interest rates on domestic bank loans[74] Market and Economic Context - In the first half of 2024, China's GDP grew by 5%, reaching RMB 61.68 trillion, indicating a robust economic recovery[81] - The new energy vehicle sector recorded a 34.3% growth in industrial output, driven by government policies promoting the replacement of old vehicles with new energy models[82] - The demand for high-quality sponge titanium is expected to grow, with domestic production capacity projected to reach 424,000 tons by 2026[85] - The global power tools market, particularly electric tools, is projected to maintain a compound annual growth rate of 5.9% from 2020 to 2025, reaching $38.6 billion by 2025, accounting for 75.2% of the total power tools market[87] Strategic Initiatives - The group is focusing on expanding its market presence in the domestic new energy vehicle sector, which is driving demand for tool steel[50] - The group has started to accept orders from other international consumer electronics manufacturers to reduce reliance on specific brands and applications[57] - The group aims to become a one-stop solution provider for cutting tools, leveraging the growing demand for various cutting tool products to strengthen its leading position in the global tool market[97] - The group is investing heavily in a digital information system called "Smart Factory," which covers all business areas and aims to enhance supply chain collaboration[104] Shareholder Returns - The company has approved a dividend of RMB 0.0400 per share for the fiscal year ending December 31, 2023, compared to RMB 0.0362 per share for the previous year[46] - The company declared an interim dividend of RMB 0.0203 per share for the six months ending June 30, 2024, compared to zero for the same period in 2023[117] - A total of 48,144,000 shares were repurchased at a total cost of HKD 82,791,380 (approximately RMB 75,189,000) during the six months ending June 30, 2024[119] Environmental and Social Responsibility - The group emphasizes green development, focusing on recycling and resource management, with a goal to reduce carbon emissions through optimized production processes[103] - The group has invested over RMB 20 million in environmental protection facilities, including a large wastewater treatment center and rooftop photovoltaic projects[103] - The group is committed to green development and aims to reduce emissions and resource consumption in response to national carbon neutrality goals[112]

年報 2023 天 工 國 際 有 限 公 司 TIANGONG INTERNATIONAL COMPANY LIMITED * (於兩曼群島註冊成立之有限公司) 股份代號 : 826 FSC * 僅供識別 106 綜合損益表 目 錄 2 財務摘要 3 主席報告 5 管理層討論及分析 27 環境、社會及管治報告 71 董事及高級管理層 74 企業管治報告 86 董事會報告 98 獨立核數師報告 | --- | |------------------------------| | 107 綜合損益及其他全面收益表 | | 108 綜合財務狀況表 | | 110 綜合權益變動表 | | 112 綜合現金流量表 | | 114 財務報表附註 | | 197 財務資料概要 | | 198 公司資料 | 財務摘要 二零二三年二零二二年 營業額 (人民幣千元)5,163,3065,066,807 本公司股權持有人應佔年內純利（人民幣千元） 370,209 503,535 每股基本盈利 (人民幣元) 0.133 0.181 每股擬派末期股息 (人民幣元) 0.0400 0.0362 營業額 人民幣百萬元 6,000 5,7 ...

Investment Rating - The report maintains a "Buy" rating for Tian Gong International [4][3]. Core Views - In 2023, the domestic demand was weak, leading to a decline in revenue from the company's main products. However, the rapid growth of titanium alloy products partially offset this decline. The company achieved a revenue of 5.173 billion yuan, a year-on-year increase of 1.8%, while net profit decreased by 26.5% to 370 million yuan. Due to the continued weak demand for mold steel, the net profit forecasts for 2024 and 2025 have been revised down to 526 million and 618 million yuan, respectively, with a new forecast for 2026 set at 708 million yuan [3][7]. Summary by Sections Titanium Alloy Growth - The sales revenue from titanium alloy reached 964 million yuan in 2023, a significant increase of 165.9% year-on-year, with a gross margin of 31.6%, up by 3.1 percentage points. The company began collaborating with domestic consumer electronics manufacturers, entering the 3C supply chain to supply frame materials for internationally renowned consumer electronics producers. The penetration of titanium materials in the consumer electronics sector is expected to rise, benefiting the company. Additionally, the company is actively exploring 3D printing and medical titanium alloy materials, anticipating continued growth in the titanium alloy business [3]. Powder Metallurgy and Cutting Tools - The sales revenue from cutting tools was 906 million yuan in 2023, an increase of 19.7% year-on-year, with a gross margin of 29.1%, up by 1.6 percentage points. The company's powder metallurgy capabilities have led to an increase in the proportion of high-speed steel cutting tools, raising the average selling price of cutting tools. The company aims to replace imports of powder taps and drill bits, expecting the profitability of the cutting tools segment to continue to rise [3]. Mold Steel Demand - The demand for mold steel remains weak, with sales revenue of 1.145 billion and 1.201 billion yuan in the first and second halves of 2023, respectively, resulting in an annual decline of 13.2%. The company initiated a 7,000-ton fast forging project in 2022, which commenced production in August 2023, breaking the reliance on imports for large-scale mold steel in China. The company has established connections with several automotive manufacturers for future collaborative research and market expansion [3].

Financial Performance - Revenue for the year ended December 31, 2023, was RMB 5,163.3 million, representing a 1.9% increase from RMB 5,066.8 million in 2022[2] - Gross profit for the same period was RMB 1,143.4 million, slightly down by 0.4% from RMB 1,148.5 million in 2022[2] - Net profit attributable to equity holders was RMB 370.2 million, a decrease of 26.5% compared to RMB 503.5 million in the previous year[2] - Basic earnings per share decreased to RMB 0.133, down 26.5% from RMB 0.181 in 2022[2] - Operating profit for the year was RMB 626.6 million, compared to RMB 619.5 million in 2022, indicating a slight improvement[4] - Total comprehensive income for the year was RMB 399.6 million, down from RMB 443.4 million in 2022[6] Assets and Liabilities - The company's net asset value increased by 3.4% to RMB 7,384.6 million from RMB 7,141.3 million in 2022[2] - Net debt increased significantly by 266.1% to RMB 708.7 million from RMB 193.6 million in the previous year[2] - The net debt to equity ratio rose to 9.6%, up 6.9 percentage points from 2.7% in 2022[2] - Total liabilities increased from RMB 5,079,482 thousand to RMB 5,400,578 thousand, an increase of approximately 6.31%[8] - Total equity increased from RMB 7,141,333 thousand to RMB 7,384,588 thousand, an increase of approximately 3.41%[10] - The company’s total assets decreased from RMB 8,283,669 thousand to RMB 8,160,497 thousand, a decline of approximately 1.48%[8] Revenue Segmentation - The revenue from the Tool Steel segment was RMB 2,345,986 thousand in 2023, down 13.3% from RMB 2,703,341 thousand in 2022[21] - The revenue from the High-Speed Steel segment decreased by 15.4% to RMB 815,904 thousand in 2023 from RMB 964,780 thousand in 2022[21] - The Cutting Tools segment saw an increase in revenue to RMB 905,754 thousand, up 19.6% from RMB 756,726 thousand in 2022[21] - The Titanium Alloy segment experienced significant growth, with revenue rising to RMB 963,836 thousand in 2023 from RMB 362,420 thousand in 2022, marking a growth of 166.5%[21] - The Other segment's revenue decreased to RMB 131,826 thousand in 2023 from RMB 279,540 thousand in 2022, a decline of 52.8%[21] Employee Costs - Employee benefits costs increased to RMB 32,978 thousand in 2023 from RMB 25,388 thousand in 2022, representing a 29.5% increase[30] - Salaries and wages rose to RMB 364,138 thousand in 2023 compared to RMB 339,665 thousand in 2022, marking a 7.2% increase[30] - The total employee costs amounted to RMB 397,116 thousand in 2023, up from RMB 365,053 thousand in 2022, reflecting an 8.8% increase[30] Taxation - Current tax expenses for 2023 were RMB 66,090 thousand, an increase from RMB 52,350 thousand in 2022, which is a 26.2% rise[32] - The corporate income tax rate for subsidiaries in China remains at 25% for both 2022 and 2023[33] - The group’s subsidiaries in Hong Kong are subject to a profit tax rate of 16.5% for both 2022 and 2023[33] Market Trends and Economic Conditions - In 2023, China's GDP reached RMB 126 trillion, growing by 5.2% year-on-year, supported by policies promoting domestic demand and consumption[83] - The overall market demand for tool steel is expected to gradually improve starting in the fourth quarter of 2023[52] - The global manufacturing PMI averaged 48.5%, a decrease of 3.3 percentage points compared to 2022, indicating ongoing recovery challenges in the global economy[87] Strategic Initiatives - The group is actively expanding into international markets, particularly in the 3D printing and medical sectors for titanium alloys[60] - The group has established a diversified overseas sales network, with the completion of the second phase of the factory in Thailand, which has an annual production capacity of approximately 100 million pieces[96] - The group is focusing on product development in the powder metallurgy field, with steady increases in product sales and advancements in high-end product research and development[97] Sustainability and Innovation - The group is actively responding to national green development strategies by implementing clean production processes, improving energy efficiency, and reducing emissions[93] - The group has invested over RMB 20 million in environmental protection facilities, including a large wastewater treatment center and rooftop photovoltaic projects[106] - The "Digital Smart Factory" project has been launched to cover all business areas, improving supply chain collaboration and significantly enhancing the group's competitiveness[107] Shareholder Returns - The company plans to distribute a proposed final dividend of RMB 0.0400 per ordinary share for 2023, up from RMB 0.0362 per share in 2022[49] - The company declared a final dividend of RMB 0.0400 per share for the year ending December 31, 2023, an increase from RMB 0.0362 in 2022[119] Corporate Governance - The Audit Committee reviewed the annual report and financial statements for the year ending December 31, 2023, confirming compliance with applicable accounting standards[124] - The company has adhered to the corporate governance code as per the Hong Kong Stock Exchange regulations for the year ending December 31, 2023[123]