Xiamen Tungsten: Baotou Jinlong's 5,000 mt (first phase) high performance NdFeB magnetic materials project completed and put into operation

On the evening of June 19, Xiamen Tungsten announced: The 5,000-tonne (Phase I) high-performance NdFeB magnetic material project, invested and constructed by Baotou Jinlong, a wholly-owned subsidiary established by Jinlong Rare Earth (a controlled subsidiary of the company), has completed all preparations and commenced production.

Regarding an overview of the project investment, Xiamen Tungsten announced: On August 2, 2024, the company held the fourth meeting of the tenth session of the Board of Directors, at which the "Proposal on the Controlled Subsidiary Jinlong Rare Earth Establishing a Wholly-Owned Subsidiary to Construct a 5,000-tonne (Phase I) High-Performance NdFeB Magnetic Material Project" was reviewed and approved. It was agreed that Fujian Golden Dragon Rare-Earth Co., Ltd., a controlled subsidiary of the company, would establish a wholly-owned subsidiary, Jinlong Rare Earth New Materials (Baotou) Co., Ltd., to construct the 5,000-tonne (Phase I) high-performance NdFeB magnetic material project in Baotou Rare Earth High-Tech Zone, Inner Mongolia Autonomous Region. The products are mainly applied in modern high-end wind power generation, 3C products, energy-efficient motors, energy-efficient home appliances, NEVs, and other fields. The total estimated investment for the project is 462.22 million yuan. This project is an important initiative for the company to further solidify its core competitiveness in high-end magnetic materials and expand its market.

Regarding the project progress announced by Xiamen Tungsten, as of now, the "5,000-tonne (Phase I) high-performance NdFeB magnetic material project" invested and constructed by Baotou Jinlong has completed all preparations, including plant construction, installation and commissioning of machinery and equipment, and trial operation of production lines, and has commenced production recently. The new-generation intelligent production line used in this project can further enhance equipment and labour efficiency. Upon full production, the company's blank capacity for magnetic material business will increase to 20,000 tonnes.

Xiamen Tungsten also provided a risk reminder: It will take some time for the project to transition from trial production to full production. The company will actively promote trial production and the final acceptance of the project. Investors are advised to pay attention to investment risks.

Xiamen Tungsten disclosed its Q1 2025 report, stating that in the first quarter of this year, the company achieved a total operating revenue of 8.376 billion yuan, up 1.29% YoY; net profit attributable to shareholders was 391 million yuan, down 8.46% YoY; net profit excluding non-recurring gains and losses was 367 million yuan, up 22.08% YoY; the net cash flow generated from operating activities was -376 million yuan, compared to 569 million yuan in the same period last year. During the reporting period, the company's basic earnings per share were 0.2463 yuan, and the weighted average return on net assets was 2.43%.

Xiamen Tungsten's 2024 annual report showed that in 2024, the company achieved a total operating revenue of 35.196 billion yuan, down 10.66% YoY; net profit attributable to shareholders was 1.728 billion yuan, up 7.88% YoY; net profit excluding non-recurring gains and losses was 1.519 billion yuan, up 8.49% YoY; the net cash flow generated from operating activities was 3.099 billion yuan, down 27.70% YoY. During the reporting period, the company's basic earnings per share were 1.2094 yuan, and the weighted average return on net assets was 14.36%. The company's distribution plan for 2024 is as follows: It is proposed to distribute a cash dividend of RMB 4.2 (tax included) for every 10 shares to all shareholders.

A research report by Huayuan Securities, commenting on Xiamen Tungsten's performance, indicates the following: Tungsten and Molybdenum Business: Profitability declined in 25Q1, possibly due to a decrease in demand for PV tungsten wires, leading the company to reduce prices to maintain market share. Rare Earth Business: Production and sales of magnetic materials increased, with profitability improving both YoY and MoM in 25Q1. New Energy Materials Business: Sales of lithium cobalt oxide (LCO) grew rapidly, and profitability improved in 25Q1. The company is a materials platform enterprise with a diversified business layout in tungsten and molybdenum, rare earths, and cathode materials. Its performance is expected to benefit from rising tungsten prices and the booming LCO market. Risk Warnings: Risk of a significant decline in demand for tungsten wires; risk of a sharp drop in rare earth prices; risk of cathode material demand falling short of expectations.

A research report by Minsheng Securities, commenting on Xiamen Tungsten, points out the following: Tungsten and Molybdenum Segment: Rising tungsten prices boosted mine profits, and PV tungsten wire sales surged. 1) In 2024, the company's tungsten and molybdenum business achieved a total profit of RMB 2.525 billion, up 7.55% YoY. 2) PV tungsten wire sales surged, reaching 107 billion meters in 2024, up 41% YoY. The substitution of PV tungsten wires for high-carbon steel wires is an inevitable trend. Its subsidiary, Xiamen Honglu, achieved a net profit of RMB 942 million, up 13.12% YoY. 3) Tungsten prices remained strong, with the price of tungsten concentrate reaching approximately RMB 136,900/mt in 2024, up 14.27% YoY, boosting tungsten mine profits. Ninghua Xingluokeng, Duchang Jinding, and Luoyang Yulu collectively achieved a net profit attributable to shareholders of RMB 630 million, up 24.18% YoY. New Energy Materials Segment: Sales increased in 2024, but profitability was under pressure. 1) In 2024, the company's new energy materials business achieved a profit of RMB 508 million, down 9.08% YoY. 2) In 2024, the company's LCO products benefited from the recovery of the 3C industry and the continuous surge in sales of the new 4.5V high-voltage LCO product. Annual sales reached 46,200 mt, up 33.52% YoY. Sales of ternary cathode material reached 51,400 mt, up 37.45% YoY. However, due to the decline in raw material prices and intensified industry competition, revenue and profit in the new energy materials segment declined YoY. Rare Earth Segment: The smelting and separation businesses of its subsidiaries, Longyan Rare Earth Co., Ltd. and Jinlong Rare Earth Co., Ltd., were no longer consolidated in 2024. The optimization of the magnetic material product mix drove a recovery in segment profitability. 1) In 2024, the company's rare earth business achieved a total profit of RMB 241 million, up 67.44% YoY. 2) In 2024, the company's magnetic material sales increased by 16% YoY. Due to increased efforts to expand into the NEV market for magnetic materials, an optimized order structure, improved capacity utilization rates, and internal cost reductions, sales and profits increased significantly YoY. Revenue and profit from rare earth metal products declined YoY due to falling prices. 3) Due to the integration with China Rare Earth Group, the smelting and separation businesses of the former subsidiaries, Longyan Rare Earth Co., Ltd. and Jinlong Rare Earth Co., Ltd., will no longer be included in the consolidated financial statements for 2024. Tungsten prices remained stable on a MoM basis in 25Q1, while PV demand slowed down slightly. 1) Tungsten prices remained stable, with the price of tungsten concentrate at approximately 143,000 yuan/mt in 25Q1, up 0.50% MoM. The demand for PV tungsten wire slowed down slightly, with sales of fine tungsten wire reaching 32.5 billion meters in 25Q1, down 5% YoY. Meanwhile, to accelerate the penetration rate of tungsten wire, the company further reduced the price of PV tungsten wire, resulting in a 28% YoY decrease in sales revenue. The total profit of the tungsten and molybdenum segment in 25Q1 was 528 million yuan, down 2.35% YoY. 2) In the energy and new materials segment, shipments of lithium cobalt oxide (LCO) increased significantly YoY. Sales of LCO products reached 12,300 mt in 25Q1, up 47% YoY. The total profit of the segment in 25Q1 was 124 million yuan, up 8.52% MoM. 3) In the rare earth segment, the total profit in 25Q1 was 66 million yuan, up 65.10% YoY. This was mainly due to a 49% YoY increase in sales of magnetic materials and a 35% YoY increase in operating revenue. Risk warnings: Risks of demand and price fluctuations due to economic volatility, risks related to raw materials, and risks of projects falling short of expectations, etc.