Truchum Advanced Materials: H1 net profit expected to increase by 42.35%-72% YoY, production and sales scale, and operating revenue continue to maintain steady growth

On July 11, the share price of Anhui Truchum Advanced Materials & Technology Co., Ltd. (Truchum New Materials) rose. By the close of trading on July 11, Truchum New Materials had increased by 1.48%, closing at 8.94 yuan per share.

Regarding the reasons for the performance changes, Truchum New Materials stated in its announcement: 1. With the successive commissioning and reaching full production of the company's product upgrade and transformation projects, the company's production and sales scale, as well as operating revenue, continued to maintain steady growth; 2. The company's continuous investment in product and technology upgrades has gradually improved the product grade and added value, while strengthening internal operational quality management, further enhancing the product market competitiveness and overall competitive advantages.

On July 7, Truchum New Materials answered investor questions on the interactive platform, stating that its subsidiary, Tianniao Gaoxin, is a large-scale industrial enterprise in China producing carbon brake preforms for aircraft. It supplies carbon fiber preforms to all domestic units producing carbon brake discs for aircraft and is the sole supplier of carbon brake preforms for the C919. The company's copper-based material products have been committed to optimizing the product structure and upgrading the products, continuously conducting R&D in new fields, new products, and new processes. Precision copper strips and copper conductor products are widely used in the semiconductor and electronics, new energy, rail transit, industrial and power sectors, among others.

On June 23, Truchum New Materials issued an announcement, stating in response to surveyor questions that the company's precision copper strips and high-end copper conductor products have already found applications in the semiconductor integrated circuit manufacturing sector. The company provides copper-based materials such as precision copper strips and conductor materials to downstream enterprises manufacturing electronic components, electronic connectors, precision instruments, etc., as key component raw materials. The products made from these materials are widely used in the electronic information industry, covering fields such as 5G, LED, electronic communications, consumer electronics, information technology, computer networks, and power grids.

Truchum New Materials introduced in its 2024 annual report that in 2024, the company achieved operating revenue of 53.7507649 billion yuan, up 16.06% YoY. However, operating performance experienced short-term fluctuations, with a total profit of 292.9431 million yuan, down 53.97% YoY, and a net profit attributable to the parent company of 229.8551 million yuan, down 56.57% YoY. This was mainly due to fluctuations in the performance of the copper-based materials sector, while the military carbon materials sector maintained a stable development trend.

Truchum New Materials introduced:1) During the reporting period, the production and sales scale, as well as operating revenue scale, of the company's copper-based materials sector maintained steady growth. In 2024, the copper-based materials sector achieved operating revenue of 52.4779751 billion yuan, up 16.84% YoY, with sales volume exceeding 1 million mt, up 6.41% YoY. Among them: copper plate/sheet and strip products were 347,200 mt, up 6.22% YoY; copper conductor products were 436,200 mt, up 6.17% YoY; copper alloy products were 60,900 mt, up 13.48% YoY. 2) Affected by multiple factors such as the macro environment, industry competition, and fluctuations in copper prices, the operating performance of the copper-based materials segment declined YoY. In particular, during Q3, downstream market consumption in the basic materials segment weakened. The company actively participated in market competition, leading to a decrease in product processing fees and a decline in gross sales margin. 3) Since Q4, market consumption has recovered, and downstream demand has significantly improved, with the basic materials segment showing a notable recovery.

The revenue composition of Anhui Truchum Advanced Materials & Technology Co., Ltd. (Truchum New Materials) disclosed in its 2024 annual report shows that in 2024, copper-based materials accounted for 96.32% of its revenue, while steel-based materials accounted for 1.31%.

Truchum New Materials outlined its 2025 work plan:

2025 is a crucial year for the company's development, marking the conclusion of the "14th Five-Year Plan" and the initiation of the "15th Five-Year Plan". Facing a complex and ever-changing economic landscape and industry competition, the company will continue to adhere to the overall development goal of "high-quality development, becoming an industry leader", striving to achieve a revenue of over 60 billion yuan.

The company will focus on the following aspects:

1. Accelerate project construction and enhance comprehensive competitive advantages

Accelerate the early commissioning and full production of completed and ongoing projects, leverage the core competitive advantages of products and brands, consolidate and expand market share, and enhance comprehensive competitive advantages. (1) Advanced copper-based materials projects: Expedite the full construction and commissioning of raised capital projects such as the "50,000-ton-per-year High-Precision Copper Alloy Strip and Foil Project" and the "60,000-ton-per-year Expansion Project of High-Precision Copper Alloy Rolled Strip (Phase II and III)". Meanwhile, use the construction of new projects as a driving force to promote process optimization, product structure optimization, and intelligent upgrading of existing production lines. Actively increase the proportion of advanced basic materials in emerging industries such as next-generation information technology, NEVs, consumer electronics, and artificial intelligence, forming a virtuous cycle of scale growth, quality improvement, and stable benefit growth. (2) Military carbon materials projects: Leveraging technological and market advantages, the company will ensure its leading position in the aerospace and defense industries. Its subsidiary, Jiangsu Tianniao, will extend its reach downstream in the carbon fiber composite materials industry chain while ensuring the supply of military products, accelerate the expansion of civilian product scale, and enrich application scenarios. Meanwhile, in accordance with the authorization of the company's shareholders' meeting, the management will advance the independent domestic listing of Dingli Technology in line with relevant policy guidelines.

2. Strengthen technological innovation and actively explore the market

Facing fierce market competition, the company plans to further expand market share through technological innovation and product quality improvement. The company will closely monitor market opportunities arising from emerging industries: In the copper-based materials sector, it will focus on areas such as renewable energy storage and intelligent AI, and actively respond to the growing demand for high-precision electronic signal transmission in the NEV and robotics sectors by arranging the production and R&D of tin-plated copper wire. In the military carbon materials sector, it will pay attention to emerging application scenarios such as aerospace and the low-altitude economy, actively seize development opportunities, enrich its core technology system, and embrace industrial transformation.

3. Delve deeper into customer groups and expand customer resources: Deepen cooperation with existing customers: Implement a tiered management system for existing customers and develop exclusive cooperation plans for core customers. For copper-based material customers, establish specialized customer service teams based on the characteristics of customers in different industries such as electronics, power, and automotive. Conduct regular follow-ups, promptly understand customer needs, and provide customized products and services. For military carbon material customers, strengthen communication and collaboration with defense and military units and aerospace enterprises, promptly respond to customer project needs, ensure timely product delivery, improve customer satisfaction and loyalty, enhance the application performance of products in weaponry, aircraft critical components, and further deepen cooperation relationships. Precisely develop potential customers: Leverage big data analysis and market survey results to intensify market surveys and identify potential customers and new market opportunities. For copper-based materials, pay attention to the development trends of emerging industries and actively explore customer resources in fields such as consumer electronics, NEVs, and semiconductors. In the military carbon materials sector, in addition to consolidating the domestic market share, actively expand into international markets to enhance the international recognition and market share of products.

4. Strengthen brand promotion and enhance brand awareness. 5. Deepen the operational model and strengthen the risk prevention and control system.

On June 11, Guojin Securities commented in a research report on Chujiang New Materials: The leader in copper processing continues to strengthen the construction of high-end capacity to meet the high-quality transformation of downstream demand: 1) China's copper processing material production has increased year by year: From 2017 to 2024, production increased from 17.23 million mt to 21.25 million mt, with a CAGR of 3.0%. The downstream consumer demand for copper plate/sheet and strip has gradually shifted from real estate to high-end manufacturing industries such as new energy. 2) The company is committed to the R&D, production, and sales of copper-based materials. It has successively initiated the construction of high-end capacity multiple times. From 2017 to 2024, the total sales volume of copper processing materials increased from 281,300 mt to 844,300 mt, the production of copper conductors increased from 77,800 mt to over 440,000 mt, and the production and sales volume of copper plate/sheet and strip maintained the first place in the country for many years. With the successive reaching of full production of high-end capacity, the company's copper processing performance may further grow. 3) Actively embrace the wave of technological development and new prosperity in industries such as AI and robotics: The subsidiary, Xinhai Gaodao, initiated a project for ultra-fine copper conductors for electronic signal communication in NEVs and robotics in 2024, and proactively arranged the production capacity of tin-plated copper wire, which is expected to benefit from the new prosperity in industries such as AI and robotics. Tianiao Gaoxin, a subsidiary, is a leader in carbon/carbon composite materials and is expected to benefit from the high growth in the aerospace sector: 1) Carbon/carbon composite materials, characterized by low density, high specific strength and modulus, and low thermal expansion coefficient, are used in high-performance aerospace cutting-edge technology fields such as the throat liners of solid rocket engines, the leading edges, trailing edges, and nose cap cones of space shuttles. 2) According to data from Business Consultant, the global market size for carbon/carbon composite materials was 16.467 billion yuan in 2022 and is projected to reach 17.521 billion yuan by 2028. 3) Benefiting from the increase in military product production, Tianiao Gaoxin's revenue increased from 309 million yuan to 747 million yuan from 2019 to 2023, with a CAGR of 24.7%, and its net profit increased from 112 million yuan to 178 million yuan, with a CAGR of 12.3%. In 2024, its revenue was 621 million yuan (-16.9%), and its net profit was 93.8 million yuan, possibly affected by fluctuations in downstream demand. 4) We believe that Tianiao Gaoxin, as the largest producer of preforms for carbon/carbon composite materials in China, is expected to fully benefit from the increased deployment and installation of aerospace equipment, the vigorous development of commercial aerospace, and the domestic substitution of aircraft carbon brake discs. Dingli Technology, another subsidiary, is a core supplier of special large-scale thermal equipment in China and is expected to benefit from the high growth in the aerospace sector: 1) Dingli Technology holds a leading position in the field of special thermal equipment, having successfully developed multiple "large-scale, ultra-high temperature, and intelligent" products, capable of providing customers with systematic solutions. 2) The market space for thermal equipment is large: According to data from Qianzhan Industry Research Institute, the market size for heat treatment equipment and process materials in China is expected to increase from 22.2 billion yuan to 28.1 billion yuan from 2021 to 2027, with a CAGR of 4%. 3) Benefiting from the robust demand in downstream aerospace, new material industries, Dingli Technology's revenue increased from 310 million yuan to 640 million yuan from 2021 to 2023, with a CAGR of 43.3%, and its net profit increased from 87 million yuan to 129 million yuan, with a CAGR of 21.9%. In 2024, affected by the slowdown in demand in aerospace, PV, semiconductor, and other fields, Dingli Technology's revenue was 648 million yuan (+0.46%), with a slowdown in growth, and its net profit was 117 million yuan (-9.0%). 4) Dingli Technology is planning a spin-off listing and intends to invest 830 million yuan in the layout of high-end thermal equipment and 3D printing fields, and may fully benefit from the robust demand for equipment driven by the development of new-quality and new-domain industries in the future. Risk warnings: Risks of changes in macroeconomic policies and economic growth slowdown, risks of fluctuations in raw material prices, market competition risks, risks of orders falling short of expectations in downstream markets for high-end equipment and carbon fiber composite materials, and risks of convertible bond conversion.