In-Depth Analysis of Product Structure Optimization Potential for China Tungsten High-Tech (000657.SZ)

Based on the comprehensive research data above, I will provide you with an in-depth analysis report on the product structure optimization potential of China Tungsten High-Tech (000657.SZ).

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China Tungsten High-Tech is the operation and management platform for the tungsten industry under China Minmetals Corporation, and is the only integrated leader of the tungsten industry chain in China[1]. The company’s managed tungsten resources (including entrusted mines) amount to 1.23 million tonnes, accounting for 11% of China’s proven tungsten resources, representing significant resource advantages[1].

The company has formed a complete tungsten industry chain covering tungsten mining, tungsten smelting, cemented carbide and deep processing, and owns several industry-leading subsidiaries:

• Zhuzhou Cemented Carbide Group (ZYCC)
  : Known as the “Cradle of China’s Cemented Carbide Industry”
• Jinzhou Company
  : Global leader in the PCB micro-drill industry
• Zhuzhou Diamond Cutting Tools (ZK)
  : Leading enterprise in China’s CNC cutting tools industry
• Zigong Cemented Carbide (ZYTC)
  : Leader in China’s tungsten-based hardfacing materials sector

In the first three quarters of 2025, the company achieved operating revenue of RMB 12.76 billion, a year-on-year increase of 13.4%; net profit attributable to shareholders reached RMB 850 million, a year-on-year increase of 18.3%[2]. In the third quarter alone, the company recorded operating revenue of RMB 4.91 billion, a year-on-year increase of 35.0% and a quarter-on-quarter increase of 10.1%; net profit attributable to shareholders was RMB 340 million, a year-on-year increase of 36.5% and a quarter-on-quarter increase of 15.9%[2].

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According to the 2025 Semi-Annual Report, the company’s main business is divided into four categories by product[3]:

Product Category	Operating Revenue (RMB 100 million)	Proportion	Gross Profit Margin	Year-on-Year Change
Cutting Tools & Tools	17.01	21.67%	32.65%	+8.25%
Other Cemented Carbide	18.16	23.14%	13.58%	+7.15%
Refractory Metals	12.74	16.24%	8.74%	+4.31%
Concentrate & Powder Products	27.27	34.76%	25.11%	+17.31%

• Extremely complete product range with over 10,000 specifications, making it the enterprise with the most complete product portfolio in the industry[4]
• Leading market share in China for multiple products: cutting tools, micro-drills, cemented carbide rolls, precision parts, hardfacing materials & buttons, molybdenum wires, etc.
• Gross profit margin of high-end products is significantly higher than that of traditional products

• Relatively low gross profit margin of traditional cemented carbide products (13.58%)
• Gross profit margin of the refractory metals segment is only 8.74%, with significant room for improvement
• High proportion of concentrate and powder products, but with relatively limited added value

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Since 2025, the price of tungsten concentrate has continued to rise sharply. As of October 30, 2025, the price of tungsten concentrate reached RMB 294,000 per tonne, with a year-to-date increase of over 106%[2]. This price hike provides important support for product structure optimization:

• Increased Resource Self-Sufficiency via Mine Injections
  : The Shizhuyuan Tungsten Mine was injected in 2024, and Yuanjing Tungsten Industry was injected in 2025, bringing the total attributable tungsten concentrate output to 10,600 tonnes per year[1]
• Prominent Cost Advantages
  : Improved upstream resource self-sufficiency enhances the company’s profit elasticity during tungsten price upcycles
• Elevated Strategic Status
  : China’s export controls on tungsten further strengthen its status as a strategic metal

• AI servers, high-speed switches and other devices are driving the development of PCBs towards higher layer counts and higher density
• Demand for coated micro-drills has surged; Jinzhou Company’s monthly production capacity has increased from 60 million units to 70 million units, and is expected to exceed 80 million units[5]

• Processing of key components for humanoid robots requires micron-level dimensional tolerances and sub-micron surface roughness
• Demand for cutting tools used in processing core components such as lead screws and reducers is growing rapidly[5]

• High-end manufacturing upgrades are driving increased demand for aerospace cutting tools
• The company continues to achieve domestic substitution breakthroughs in the aerospace field

Currently, approximately 45% of the domestic high-end cemented carbide cutting tools market is still dominated by international giants such as Sandvik and Kennametal[5]. With:

• Growing demand for independent and controllable supply chains
• Supply chain security considerations amid international trade frictions
• Increasing recognition of the quality of domestic cutting tools

The trend of domestic substitution is irreversible, providing broad incremental space for China Tungsten High-Tech’s high-end products.

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The company is continuously optimizing its product structure through capacity switching, product upgrading and industry expansion:

(Jinzhou Company)[1]:

Project	Annual Capacity (10,000 units)	Construction Period	Production Date
140 Million Units Micro-Drill Intelligent Manufacturing Renovation Project	14,000	3 years	4th Year
130 Million Units Additional Micro-Drill Technical Renovation Project	13,000	2 years	3rd Year
Special Production Line for Ultra-Long-Aspect-Ratio Precision Micro-Tools for AI PCBs	6,300	3 years	4th Year
Total	101,300	-	-

: Increase from the current approximately 900 million units per year to 1.013 billion units per year, representing a growth rate of approximately 12%[1]

:

• “Carbon Knight” HL New Product Series: Designed for high-aspect-ratio micro-hole processing of high-layer-count high-speed boards in the AI server sector
• PK Series: Designed for micro-hole processing of FC-BGA thick-core packaging substrates for high-end chips
• ND-type Coated Micro-Drills: Service life increased by more than 2x when processing high-abrasion plates[3]

:

• Continuous upgrading of solid tools and CNC cutting tools
• Gross profit margin of cutting tools and tools reaches 32.65%, significantly higher than the company’s average level

:

• Development of tantalum-tungsten alloys for aerospace applications has completed target testing in collaboration with customers
• Successful production of high-end products such as tungsten-copper composite blocks for nuclear fusion divertors and molybdenum-niobium alloy rotating targets[3]

:

• Successfully developed cemented carbide materials for offshore oil and gas exploration
• Developed China’s first high-performance while-drilling mud pulser with a transmission rate of 20bps[3]

Based on the company’s current business composition and product development plan, product structure optimization is mainly reflected in the following aspects:

Optimization Direction	Current Status	Optimization Target	Incremental Potential
Proportion of Cutting Tools	21.67%	25%+	+3-5 percentage points
Average Price of CNC Inserts	Dominated by basic products	High-end coated products	+15-30%
Proportion of High-End PCB Micro-Drills	~30%	50%+	+20 percentage points
Profit Contribution from Mining Segment	~70%	75%+	+5 percentage points

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:

• The 10,000-tonne renovation project at Shizhuyuan is expected to be completed and put into operation in 2027, which will increase attributable tungsten concentrate output by an additional 2,000 tonnes per year[1]
• Three tungsten mines under China Minmetals Corporation that are currently entrusted are actively being promoted for injection, with an estimated total tungsten concentrate output of 14,000 tonnes
• It is expected that by 2028, the company’s tungsten resource self-sufficiency rate will be significantly improved

:

• Shizhuyuan Company achieved net profit of RMB 705 million in 2024, accounting for approximately 70% of the company’s total net profit[4]
• Profit growth from the mining segment offsets profit fluctuations in the midstream and downstream segments, significantly enhancing performance stability

:

• Benefiting from growing demand for PCBs in AI servers, micro-drill products are experiencing both volume and price growth
• Demand for cutting tools used in processing high-layer-count boards and high-aspect-ratio boards continues to increase

:

• Layout of cutting tools for processing core components such as lead screws and reducers
• Development of micron-level precision processing solutions

:

• Domestic substitution of micro-tools for FC-BGA packaging substrates
• Technological breakthroughs in precision cutting tools for semiconductor manufacturing

:

• Coating technology upgrading: Extend tool service life by more than 2x
• Precision processing technology: Meet micron-level tolerance requirements
• New material development: Tantalum-tungsten alloys, materials for nuclear fusion, etc.

:

• Upgrade from traditional inserts to CNC inserts and solid tools
• Upgrade from low-end products to high-end coated cutting tools
• Upgrade from standard products to customized solutions

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:

1. Integrated leader in the tungsten industry with dual advantages in resources and deep processing
2. Continuous advancement of mine injections, with steady improvement in resource self-sufficiency
3. Broad space for domestic substitution of high-end cutting tools, with demand driven by emerging industries such as AI
4. Product structure optimization drives continuous improvement in gross profit margin

:

• Current P/E (TTM): 54.12x[6]
• Forecast P/E for 2025-2027: 44.1x/33.9x/28.8x[2]

Risk Type	Details
Tungsten Price Fluctuation Risk	Sharp decline in tungsten prices may impact the company’s profitability
Demand Shortfall Risk	Progress of manufacturing recovery affects cutting tool demand
Mine Injection Progress Risk	Progress of tungsten mine injection may fall short of expectations
Intensified Competition Risk	Competition in the high-end cutting tools market is becoming increasingly fierce

Considering the company’s leading industry position, expectations for resource injections, product structure optimization potential and valuation level, China Tungsten High-Tech has medium-to-long-term investment value. It is recommended to focus on:

• Progress of mine injections
• Production capacity release progress of high-end products
• Changes in demand from downstream emerging industries

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As a global integrated leader in the tungsten industry, China Tungsten High-Tech has significant competitive advantages and broad growth potential in product structure optimization:

1. Vertical Optimization Potential
   : Continuously inject upstream tungsten mine resources to improve resource self-sufficiency, enhance industry chain control and profit elasticity

2. Horizontal Expansion Potential
   : Emerging fields such as AI servers, humanoid robots and semiconductors drive explosive demand for high-end tools, and the company, as an industry leader, is expected to fully benefit

3. Product Upgrading Potential
   : Upgrade from traditional products to CNC cutting tools, coated cutting tools and precision micro-tools, with significant room for gross profit margin improvement

4. Domestic Substitution Potential
   : 45% of the high-end cutting tools market is occupied by foreign enterprises, and the trend of domestic substitution is irreversible

Against the backdrop of the “rising tungsten prices and expensive tools” theme, China Tungsten High-Tech is expected to achieve transformation and upgrading from a resource-based enterprise to a high-end manufacturing enterprise through continuous product structure optimization, ushering in a new stage of development with both volume and price growth.

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[1] China Galaxy Securities - In-Depth Report: Integrated Leader in the Tungsten Industry, Mine Injections Open a New Chapter (December 26, 2025)
[2] Hwaryon Securities - Company Comment on China Tungsten High-Tech (000657.SZ): Q3 Profit Hits New High for the Same Period, Tungsten Mine Injections Continue to Advance (October 2025)
[3] China Tungsten High-Tech - Full Text of 2025 Semi-Annual Report (August 27, 2025)
[4] TF Securities - Annual Report Comment on China Tungsten High-Tech (000657) (April 30, 2025)
[5] Cailianshe/Sina Finance - “Rising Tungsten Prices and Expensive Tools” Becomes Main Theme, Industry Profitability May Further Improve in 2026 (December 31, 2025)
[6] Jinling AI Financial Database - Market Data and Technical Analysis (January 18, 2026)