Results Review

1Q26 results in line with our expectations

In 1Q26, revenue rose 47.65% YoY and fell 11.02% QoQ to Rmb3,554mn, and net profit attributable to shareholders grew 104.43% YoY and fell 3.53% QoQ to Rmb988mn. The firm’s 1Q26 results in line with our expectations.

Sharp rise in gold prices boosted earnings; temporary decline in mined gold output led to rising costs. Gold prices rose 62.18% YoY and 14.61% QoQ to Rmb1,089/g in 1Q26. The company's 1Q26 mined gold output was 2.98t, down 10.71% YoY, operating cost was Rmb408/g in 1Q26, up 15.01% YoY, and total maintenance cost was Rmb484/g, up 38.61% YoY. We attribute the decline in the firm's output and the temporary increase in costs to a higher tax base driven by the Ghanaian government's levy under sustainable development goals and rising gold prices. In addition, we attribute the shortterm decline in ore output due to technical upgrades and overhauls at mines, which led to an increase in fixed costs. The firm expects its costs to return to normal levels after production normalizes.

Trends to watch

The firm aims to increase gold mine output and continue to effectively control costs. In the domestic market: 1) Wulong Mining and Jilong Mining will continue to advance technological upgrading and push their projects to reach designed capacity, 2) Xidengping Gold Mine Phase II has completed the transition from exploration to mining, and the firm's designed annual gold production capacity has exceeded 1t.

In overseas markets: 1) The Sepon mine in Laos will continue to contribute additional gold output as planned, and the SND gold and copper mine in the south may provide resources for the firm's future output growth. The open-pit mining project of the Khanong Copper Mine has officially started operation. 2) The Wassa mine in Ghana has restarted the DMH pit, continued to increase pits in the main mining area to boost ore output, and started preparatory work before the development of the Father Brown Deposits.

Zijin Mining plans to acquire controlling interest; we expect the company to see improvements in three aspects. We expect synergies in three aspects to accelerate the firm’s growth after the acquisition by Zijin. The acquisition will 1) help resolve overseas operating risks and reduce cost pressure, 2) enable the company to receive funding and technological support to unleash the potential of its assets, and 3) enable the company to make breakthroughs by leveraging the leading platforms.

Financials and valuation

Given rising gold prices, we raise our 2026 earnings forecast 91% to Rmb6,072mn and introduce our 2027 earnings forecast of Rmb6,555mn. The stock is trading at 12.7x 2026e and 11.8x 2027e P/E. Maintain OUTPERFORM. Given declining investor risk appetite, we raise our target price by 45.2% to Rmb51.12, corresponding to 16.0x 2026e and 14.8x 2027e P/E and offering 26% upside.

Risks Sharp fluctuations in gold prices; disappointing progress of projects; rising geopolitical risks.