The road of technological transformation of new materials enterprises, a sample of Tiangong Int'l (00826) breaking through in China's manufacturing industry.

Due to the deep intertwining of complexity and uncertainty, the global economy in 2024 can be said to have experienced a rough autumn. However, industry "headwinds" also serve as a window to validate the quality of a company's operations. Companies that can continue to develop resilience in this environment are even more commendable. On March 31, TIANGONG INT'L (00826) disclosed its performance for 2024. From the financial report, TIANGONG INT'L not only delivered a resilient and structurally highlighted report under the "pressure test" but also showed many positive changes in its fundamentals. The company may accelerate its breakthrough point and performance is expected to rebound quickly. The financial report shows that in 2024, TIANGONG INT'L achieved a revenue of 4.832 billion yuan, with a net profit attributable to shareholders of 359 million yuan, and a significant increase in net cash flow from operating activities to 502 million yuan. Breaking down the revenue structure, mold steel is still the company's largest source of income, accounting for 47.1% of the annual revenue; cutting tools, high-speed steel, and titanium alloys accounted for 18.2%, 17%, and 15.7% respectively. Thanks to TIANGONG INT'L actively responding to changes in domestic demand, the domestic mold steel business showed a steady performance last year with a 16.2% increase in revenue to 1.008 billion yuan; meanwhile, the domestic sales revenue of high-speed steel, as the main material for cutting tools, increased by 9.8% to 422 million yuan. The outstanding performance in the domestic market strongly supported the steady development of Tiangong's mold steel and high-speed steel business. In terms of cutting tools, although there are signs of a comprehensive recovery in the domestic manufacturing industry, due to high inventory levels among domestic distributors, TIANGONG INT'L's sales revenue in this business in 2024 was 333 million yuan, still at the bottom for the time being. However, with inventory digestion, the author predicts that the company's domestic sales of cutting tools will turn upwards this year. At the same time, benefiting from strong downstream demand in the North American market, and the previously anticipated layout of a production base in Thailand by TIANGONG INT'L, the company's export sales increased by 5% to 546 million yuan last year. As for the titanium alloy business, TIANGONG INT'L saw an overall increase in sales volume by 9.1%; however, due to product structure changes, the selling price of titanium alloy products slightly declined. Overall, TIANGONG INT'L's main business in 2024 has structural highlights, and signs of stabilizing and rebounding are increasingly strong. In addition to the above-mentioned operational highlights, TIANGONG INT'L's financial report also shows that it is accelerating the establishment and improvement of a high return mechanism to reward investors. In 2024, TIANGONG INT'L distributed mid-term dividends for the first time, with a distribution ratio of 30%, amounting to 55.31 million yuan; according to a recent announcement, the company also plans to distribute annual dividends of 71.75 million yuan, which, including mid-term dividends, will further increase the annual dividend ratio to 35%. GMTEight believes that the reason TIANGONG INT'L continues to make positive progress in a challenging market environment is ultimately due to its strategic emphasis on technological innovation and increased investment in research and development. In terms of top-level design, TIANGONG INT'L focuses on creating value for customers and has shifted from "selling products" to "continuous service" by centering around the five core elements of "QCDSI" (Quality, Cost, Delivery, Service, Innovation), forming a beneficial cycle of "demand-driven innovation, service-enhanced stickiness". Based on its own innovation system, in recent years TIANGONG INT'L has increased investment in strategic emerging products and software and hardware. For example, in response to the new trend of increasing demand for integrated die casting, TIANGONG INT'L has strengthened technical cooperation with downstream die casting companies and developed a series of innovative products based on the functionality and application environment of die-cast mold steel components. For example, in the highly anticipated Siasun Robot&Automation sector, TIANGONG INT'L has accumulated technical expertise in special materials such as lead screws. In order to better adapt to the changing and growing demands of downstream customers, TIANGONG INT'L has innovatively used a unique powder metallurgy process to develop two new high-nitrogen, high-strength, corrosion-resistant alloy steels based on its two traditional powder metallurgy high-speed steels. In addition, to further enhance its scientific and innovation capabilities in the cutting tools sector, TIANGONG INT'L introduced Professor Zhou Jinming, an international expert in the cutting field, early last year. Under Professor Zhou's leadership, TIANGONG INT'L will establish a first-class precision tool research institute in China. Countless similar cases exist, and depending on market conditions, TIANGONG INT'L also successfully transforms innovations from their laboratories into commercial applications. Previously, Tiangong successfully delivered its first order for aerospace-grade fastening titanium wire material, marking a milestone breakthrough for the company; last month, the second phase of the EB furnace project was successful in casting high-quality titanium ingots, further consolidating the company's technological advantage in the high-end titanium and titanium alloy fields. Under the guiding principle of "without innovation there is no development", in 2024, the ratio of research and development expenses to revenue for TIANGONG INT'L was 6.2%, consistently staying above 6% for two consecutive years. From the achievements already obtained, it can be said that TIANGONG INT'L is evolving from a company deeply rooted in the development of new materials subfields to a technology-driven conglomerate striving to reshape the global new materials industry with hardcore technology. World-leading technology is not only the cornerstone of TIANGONG INT'L's past outstanding achievements but will also be the core driving force for the company to steadily progress in its business and achieve global breakthroughs in the future. Looking ahead, TIANGONG INT'L, with higher and more versatile technological content, will undoubtedly further strengthen its growth elasticity and certainty.