1Q25 results hit a new high and beat our expectations

In 1Q25, revenue rose 5.55% YoY to Rmb78.93bn and net profit attributable to shareholders grew 62.39% YoY and 32.16% QoQ to Rmb10.17bn. Recurring attributable net profit rose 58.76% YoY and 24.37% QoQ to Rmb9.88bn, beating our expectations, mainly due to higher-than- expected gold prices and better-than-expected cost control for copper mining.

Trends to watch

The firm's results hit a new high, due to the following factors.

The sales volume and price of mine-produced copper increased, costs remained flat, and gross profit rose Rmb1.16bn QoQ to Rmb8.34bn. In 1Q25, the ASP of the firm's mine-produced copper rose 5% QoQ to Rmb62,030/t, sales volume rose 7% QoQ to 219,926t, and production costs stayed largely flat QoQ at Rmb24,107/t.

The sales volume and price of mine-produced gold rose, costs increased, and gross profit grew about Rmb1.34bn QoQ to Rmb7.04bn. In 1Q25, the ASP of the firm's mine-produced gold rose 12% QoQ to Rmb642/g, sales volume rose 7% QoQ to 18t, and production costs increased 7% QoQ to Rmb251/g.

The sales volume of mine-produced zinc rose, prices fell, costs increased, and gross profit fell around Rmb0.26bn QoQ to about Rmb0.43bn. In 1Q25, the ASP of the firm's mine-produced zinc fell 12% QoQ to Rmb15,018/t, sales volume rose 2% QoQ to 90,466t, and production costs increased 11% QoQ to Rmb10,256/t.

The sales volume and price of mine-produced silver rose, costs increased, and gross profit grew Rmb0.02bn QoQ to Rmb0.37bn. In 1Q25, the ASP of the firm's mine-produced silver rose 6% QoQ to Rmb5.5/g, sales volume grew 2% QoQ to 105t, and production costs increased 8% QoQ to Rmb2/g.

In terms of non-recurring income, the firm's gains and losses from fair value changes were Rmb0.48bn in 1Q25, significantly boosting attributable net profit.

Share buyback shows management's confidence in long-term growth; disposal of non-core mines to optimize asset structure.

The firm completed its A-share buyback on April 10, and it actually repurchased 64.3mn shares (0.24% of total shares) at an average price of Rmb15.55/sh. It used Rmb1bn of funds. The share buyback shows the firm's confidence in long-term growth.

According to the announcement, the firm completed the sale and settlement of Bullabulling Gold, a wholly owned subsidiary of Norton Gold Fields on April 7, which is likely to help the company optimize its asset structure and improve operating efficiency, and is in line with the firm's strategic plan to dispose of assets with limited contribution to its overall value.

Long-term copper and gold output to rise systematically; firm accelerating its drive to rank among the world's top 3-5 miners. In its new Five-Year Plan (FYP), the firm has released its output guidance for 2028, implying large growth potential compared to the current levels. Over 2024-2028, we expect the firm’s output of mine-produced copper to grow at a CAGR of about 8%, and its output of mine-produced gold to grow at a CAGR of 6% with a systematic increase in copper and gold output. The firm is accelerating the transformation of its resource advantages into production capacity and economic strength, advancing its goal of becoming one of the global top-three to five mining companies.

Financials and valuation

As gold prices continue to hit new highs, we raise our 2025 and 2026 attributable net profit forecasts 8% and 9% to Rmb42bn and Rmb45bn. We maintain OUTPERFORM ratings for A-shares and H-shares. We keep our target prices of Rmb23 for A-shares and HK$21.4 for H-shares. A- shares are trading at 11x 2025e and 10x 2026e P/E. Our TP for A-shares implies 15x 2025e and 14x 2026e P/E, offering 34.1% upside. H-shares are trading at 10x 2025e and 9x 2026e P/E. Our TP for H-shares implies 13x 2025e and 12x 2026e P/E, offering 29.4% upside.

Risks

New supply of copper and zinc mines beats expectations; disappointing gold prices and/or capacity expansion of its projects.