• REITERATE Buy Entry – 5.2 Target – 6.0 Stop Loss – 4.8
  • China Molybdenum Co., Ltd. is a China-based company, principally engaged in the mining, smelting, processing and trading of metals, such as molybdenum, tungsten and copper. The company operates its businesses through five segments. Its Molybdenum, Tungsten and Related Products segment is mainly engaged in the mining of molybdenum and tungsten. Its Copper, Gold and Related Products segment is mainly engaged in the mining of copper and gold. The Niobium and Related Products segment is engaged in the niobium manufacturing business. The Phosphorus segment is engaged in phosphate manufacturing business. The Copper and Cobalt segment is engaged in the production of Copper and Cobalt. The Company conducts its businesses mainly in China, Australia, Brazil and Congo.
  • 1H21 operating revenue jumped by 81.45% YoY to RMB84.8bn. Net profit attributable to shareholders jumped by 139.0% YoY to RMB10bn. The stellar performance was due to the increases in both sales volumes and ASPs.
  • Production guidance as of June 2021:
Principal products Production volume (tonnes)
TFM copper metal187,300 – 228,90098,149
Cobalt metal 16,500 – 20,1007,010
Molybdenum metal 13,800 – 16,9007,999
Tungsten metal (excluding Yulu Mining)6,900 – 8,400 4,272
Iron concentrates (65%)NA144,950
Niobium metal8,700 – 10,6003,947
Phosphate fertilizer (HA+LA)999,000 – 1,221,000520,506
NPM copper metal (80% equity interest of NPM)24,100 – 29,40011,656
NPM gold (80% equity interest of NPM)21,300 – 26,000 (ounces)9,643 (ounces)
IXM metal trading (sales volume)
Concentrate products4,790,000 – 5,850,0001,303,955
Refined metal productsNA1,844,022
  • Ongoing economic recovery benefits the industrial sector. Industrial metals market remained buoyant after topping out over the past few months. The price rally was due mainly to the supply chain issues. With the gradual reopening of borders among major economies from 4Q21 onwards, the disruptions on the global supply chain are expected to be mitigated. In FY22, we expect to see normalization of production activities, and which will be positive for the supply and demand dynamics. However, inflation will still be the main theme in 2022. As long as basic metal prices stay afloat, the growth in production will help the extension of growth till next year. 
  • Short-term catalyst. As of 22th October Friday, the copper inventory in the mainstream Chinese markets dipped by 14,400 mt from Monday to 94,700 mt. The impact from the previous power shortage started to spill over to the stockpile of industrial metals. With the slowdown of production during winter in China, the metal shortage could result in a  year-end rally in industrial metal prices.    
  • The consensus estimate per the 12-month target price is HK$7.16. EPS is forecasted to grow at 4.6%/7.4%/51.1% for FY2022/23/24F, which would bring forward FY2022/23/24F P/Es down to 17.2x/16.4x/15.3x.
3993 HK (Source: Bloomberg)