Broker: UOB Kay Hian
Date of Report: 21 July 2025
Tiangong International: Riding the Wave of Specialty Steel and Titanium Alloy Recovery in 2025-26
Company Overview: A Global Leader in Specialty Steels
Tiangong International (HKEX: 826) stands as a premier global manufacturer specializing in high-speed steel, die steel, cutting tools, and titanium alloys. With a market capitalization of HK\$5,723 million (US\$744 million) and a robust footprint in specialty materials, Tiangong is well-positioned to benefit from the ongoing recovery in industrial demand and the rising adoption of advanced materials in consumer electronics and new technology sectors.
Stock Snapshot and Performance
- Share Price: HK\$2.10
- 52-Week High/Low: HK\$2.52 / HK\$1.42
- FY24 NAV/Share: HK\$2.6
- FY24 Net Debt/(Cash)/Share: HK\$0.6
- YTD Return: 11.7%
- Major Shareholder: Mr. Zhu Xiaokun (25.3%)
- 3-month Avg. Daily Turnover: US\$8.3 million
Strategic Positioning in Global Specialty Materials
Tiangong ranks second globally in die steel and first in high-speed steel. Its products play a pivotal role in industries such as:
- Automobiles (40% of die steel downstream use)
- Home Appliances (20%)
- Consumer Electronics (20%)
The company has also successfully expanded into cutting tools, broadening its vertical integration and value proposition.
Surging Demand for Titanium Alloys
Titanium alloys have become increasingly vital, especially in consumer electronics like smartphones and wearable devices, due to their lightweight, high-strength, and corrosion-resistant properties. In 2024, titanium alloys contributed 16% of Tiangong’s revenue, achieving a standout gross margin of 33.5%—significantly higher than die steel (12.1%) and high-speed steel (15.2%). Tiangong is a core supplier to leading smartphone brands and anticipates further demand growth as new products launch in 2026.
Commitment to Innovation and R&D
Tiangong is heavily invested in the development of next-generation materials. Notable R&D initiatives include:
- Powder metallurgy for high-end die casting
- High-nitrogen stainless steel for robotics
- Low-activation steel powder for nuclear reactors
The company’s R&D expense ratio stood at 6.1% in 2023 and 6.2% in 2024, reflecting its commitment to innovation and tailored product development through close customer collaboration.
Strategic Global Expansion
Accelerating its global footprint, Tiangong has expanded manufacturing capacity in Thailand:
- Precision tools production in Thailand has scaled up to 12 million pieces per month.
- Construction has commenced on a new tool and die steel production base in Thailand, reinforcing global capacity optimization.
Financial Performance: In-Depth Analysis
| Year to 31 Dec (RMBm) |
2020 |
2021 |
2022 |
2023 |
2024 |
| Net Turnover |
5,221 |
5,745 |
5,067 |
5,163 |
4,832 |
| Gross Profit |
1,214 |
1,405 |
1,148 |
1,143 |
984 |
| Operating Profit |
751 |
869 |
517 |
595 |
442 |
| Net Profit |
537 |
664 |
504 |
370 |
359 |
| EPS (cents) |
20.9 |
24.4 |
18.1 |
13.3 |
13.1 |
| P/E (x) |
9.3 |
8.0 |
10.8 |
14.7 |
14.9 |
| P/B (x) |
0.9 |
0.8 |
0.8 |
0.8 |
0.8 |
| Dividend Yield (%) |
3.5 |
2.8 |
1.7 |
1.9 |
2.2 |
| Net Margin (%) |
10.3 |
11.6 |
9.9 |
7.2 |
7.4 |
| Net Debt to Equity (%) |
38.8 |
(6.8) |
4.7 |
11.3 |
21.6 |
| ROE (%) |
9.8 |
11.0 |
7.5 |
5.2 |
5.1 |
Key Financial Highlights
- Gross margin decreased from 24.5% in 2021 to 20.4% in 2024, reflecting pricing and cost challenges.
- Net margin relatively stable at 7.4% in 2024, following efficiency improvements and product mix optimization.
- Dividend payout ratio reached 35% in 2024, aligning with the company’s focus on shareholder returns as it pursues deleveraging.
- Tiangong repurchased 1.8% of its issued shares in 2024, underlining its commitment to enhancing shareholder value.
- Trading at a trailing 12-month dividend yield of 2.2%.
Segmental Revenue Breakdown (2024)
- Specialty Steel: Core product segment, leveraging global leadership in die steel and high-speed steel.
- Titanium Alloy: High-growth area, driven by consumer electronics and new application development.
Cash Flow and Balance Sheet Insights
- Operating cash flow rebounded to RMB 338 million in 2024 after a negative outflow in 2023, supported by a strong working capital position.
- Investing activities generated an inflow of RMB 410 million in 2024, reflecting disciplined capital management and selective growth investments.
- Net debt to equity increased to 21.6% in 2024, signaling a moderate rise in leverage as expansion projects ramp up.
Outlook for 2025-26: Growth Catalysts and Strategic Focus
Tiangong is optimistic about its 2025-26 outlook, forecasting:
- Recovery in demand for traditional specialty steels, particularly as global manufacturing and automotive sectors rebound.
- Ongoing growth in titanium alloy sales, with expected order refills from key consumer electronics customers in 2026.
- Continuous focus on high-end materials, intelligent manufacturing, and deepened international expansion, especially in Southeast Asia.
- Enhanced shareholder returns through sustained dividend payouts and further share repurchases as deleveraging progresses.
Conclusion: A Compelling Specialty Materials Play for Global Investors
With a strong global market position, innovative product development, and a clear strategy for international expansion, Tiangong International is poised to capture opportunities from the recovery in specialty steel and the surging demand for titanium alloys. The company’s commitment to R&D, prudent financial management, and shareholder-friendly initiatives make it a noteworthy candidate for investors seeking exposure to advanced materials and industrial innovation.
