CICC: Maintains outperform rating on Tiangong Int'l (00826), target price of 5.29 Hong Kong dollars.

CICC released a research report stating that Tiangong Int'l (00826) is expected to see high growth in its 3C titanium materials and powder products in 26/27. The bank has raised the 26-year net profit attributable to shareholders to 760 million yuan (an increase of 8.9%), while keeping the 27-year net profit unchanged at 890 million yuan. The current stock price corresponds to a 26/27e P/E of 11/9x. The bank maintains an outperform rating for the company and a target price of 5.29 Hong Kong dollars (corresponding to a 26/27e P/E of 17/14x), implying a 59% upside potential. Key points from CICC include: - Performance in 2025 meets market expectations - The company reported its 2025 performance: revenue of 4.719 billion yuan, net profit attributable to shareholders of 400 million yuan, a year-on-year increase of 11.6%. In the second half of 2025, revenue was 2.376 billion yuan, a year-on-year increase of 2.9%; net profit attributable to shareholders was 197 million yuan, a year-on-year increase of 12.8%. The company's 2025 performance meets market expectations. - High-end strategic advancement, continuous increase in profitability - In 2025, the company's sales volume of mold steel, high-speed steel, and titanium alloy were 132,700 tons, 13,500 tons, and 7,300 tons respectively, with average selling prices of 17,300 yuan, 58,500 yuan, and 85,900 yuan per ton. The sales volume of cutting tools increased by 2.2% to 234 million units, with an average price increase of 2.8% to 3.95 yuan per unit. In terms of profitability, the company's gross profit margin for high-speed steel and mold steel in 2025 increased by 1.5% and 2.4% respectively to 16.7% and 14.5%, mainly benefiting from the increase in sales of high-end products. The company's non-IFRS net profit in the second half of 2025 was 137 million yuan, a 309% increase from the previous period. The bank expects the company's main profitability to continue to improve. - Strengthening core competitiveness through hard work, high growth expected in the company's 3C titanium materials business - The bank believes that the company's competitive strength in titanium alloys is expected to increase: 1) The company has mastered the ability to reuse titanium alloy scraps (EB furnace) to meet customers' high ESG requirements; 2) As a core supplier to leading consumer electronics brands, it has passed rigorous customer certifications; 3) The annual production of 3,000 tons of high-end titanium materials will increase total capacity to tens of thousands of tons, and the company is also looking ahead with the layout of titanium alloy powder production lines to seize the trends in 3D printing and additive manufacturing. The bank expects the company's sales of high-end 3C titanium materials to see high growth in 26/27. - Mastering powder metallurgy platform technology, breaking the growth ceiling - The company has mastered the core technology of powder metallurgy, and the bank believes that the company will gradually enter a period of harvest in 26. In the field of Siasun Robot&Automation, the company's independently developed high-nitrogen alloy has been delivered for use in planetary roller screws, entering the core supply chain of humanoid Siasun Robot&Automation transmission systems; in the field of nuclear fusion, the company's high boron stainless steel (304B7) has completed ton-level engineering trials, and RAFM low-activation steel has entered the deep research stage; in the field of new energy vehicles, integrated powder metallurgy die-casting mold components can significantly improve the mold's lifespan, with expectations for mass production in 26. - Risk warning: Downstream demand exceeding expectations may decline significantly; significant exchange rate fluctuations may bring uncertainty to profits.