3Q25 results in line with our expectations Huayou Cobalt announced its 3Q25 results: In 1–3Q25, revenue rose 29.6% YoY to Rmb58.94bn, and net profit attributable to shareholders grew 39.6% YoY to Rmb4,216mn. In 3Q25, revenue rose 40.9% YoY and 12.3% QoQ to Rmb21.74bn, and net profit attributable to shareholders grew 11.5% YoY and 3.2% QoQ to Rmb1,505mn.

Strong production in nickel sector offsetting falling prices; rising cobalt prices contributing incremental profit. According to iFinD, average prices of LME nickel, MB cobalt, lithium carbonate, and LME copper changed -11%, +15%, -26%, and +4% YoY in 1–3Q25. In 3Q25, average prices of LME nickel, MB cobalt, lithium carbonate, and LME copper changed - 8%, +37%, -9%, and +6% YoY, and changed -1%, +12%, and +4% QoQ.

Trends to watch

Key projects progressing smoothly; strengthening advantages in industrial integration. Resources: The firm acquired stakes in two laterite nickel mines, and the supplementary exploration of the Arcadia lithium mine increased its lithium reserves by 63%. Smelting: Pomalaa and Sorowako hydrometallurgy nickel projects in Indonesia, as well as the lithium sulfate project in Zimbabwe were progressing smoothly. Materials: The Huaneng 50,000t ternary precursor Phase I project in Indonesia started to supply products on a large scale, laying a foundation for the firm’s entry into the North American market; the 25,000t cathode material Phase I project in Hungary was progressing smoothly, positioning the firm well for seizing opportunities in the European and global lithium-ion battery (LiB) value chain.

Tightening supply and demand conditions pushing up cobalt prices; solid-state batteries to boost demand for ternary batteries. On October 11, the Democratic Republic of the Congo (DRC) announced details of its cobalt export quota1, which took effect on October 16.

We estimate that the total annual cobalt export quota for 2026/27 will account for only 44% of the DRC's cobalt output in 2024, and the basic quota will account for only 40%. Given the commercial application of large cylindrical and solid-state batteries, we believe the penetration rate of ternary batteries will gradually rebound after bottoming out, supply and demand conditions in the global cobalt industry will remain tight over 2025–2027, and average cobalt prices will see a systematic increase. The firm's cobalt by-product from hydrometallurgical nickel production in Indonesia will fully benefit from rising cobalt prices, as well as a cobalt export quota of 1,080t from the DRC in 2026.

Financials and valuation We raise our 2025 and 2026 earnings forecasts 20.3% and 54.3% to Rmb5.92bn and Rmb8.33bn in view of the firm's cobalt sales volume in the DRC and the sharp rise in cobalt prices. The stock is trading at 20.1x 2025e and 14.3x 2026e P/E. We maintain OUTPERFORM, and raise our target price 72.1% to Rmb74.56 to reflect our earnings forecast revisions and the boost to its valuation from the strategic re-rating for cobalt. Our target price implies 23.9x 2025e and 17.0x 2026e P/E and implying 19.1% upside.

Risks Disappointing volume control and price hikes in the DRC; disappointing ternary demand.