1H25 results beat our expectations

JCHX Mining Management announced its 1H25 results: Revenue rose 47.82% YoY to Rmb6,316mn, and net profit attributable to shareholders grew 81.29% to Rmb1.11bn. In 2Q25, revenue rose 52.39% YoY and 24.7% QoQ to Rmb3.51bn, and net profit attributable to shareholders grew 103.25% YoY and 63.3% QoQ to Rmb689mn. 1H25 results beat our expectations, due to the firm's increased production and sales volume as well as effective cost control.

Mining service segment under short-term pressure; growth of resource segment accelerating. In 1H25, gross profit of the mining service segment fell 17.26% YoY to Rmb770mn, and that of the resource segment grew 276.83% YoY to Rmb1.39bn.

From the perspective of mining services, the internalization of the mining services business after the acquisition of the Lubambe copper mine weighed on revenue; the gross profit of the business was still in the early stages after the completion of the acquisition of Australia's Terra Mining mining service provider; and related operations were suspended due to the earthquake in the non-contracted section of the Kamoa-Kakula copper mine.

In the resource sector, the firm's mine output continued to increase, with copper metal (equivalent) and phosphate ore output up 199% and 6% YoY to 39,000t and 174,000t in 1H25. LME copper prices rose 2.5% YoY. We think the worst is over for the mining service sector, and expect the business to regain growth as new projects start, while the resource sector should accelerate earnings growth thanks to rising sales volume and prices.

Trends to watch

A leading provider of integrated mine operation services; "mining services + resources" strategy to drive rapid growth. In terms of mining services, the company has presence in both domestic and overseas markets. In 1H25, it signed two new mining service projects in Mufulira (Zambia) and Khoemacau (Botswana). Despite the short-term slowdown due to temporary factors, we believe the firm's earnings from mining services will continue to improve steadily thanks to its efforts to explore domestic and overseas markets.

In terms of resources segment, the company has realized a dual-driver development model of "mining services + resources", continuously strengthening its resource strength, and promoting the comprehensive transformation of the company from a single mine development service company to a group-based mining company. We believe the firm's "services + resources" strategy has started leapfrog development, and we are upbeat on its long-term resource growth.

Copper mine output to accelerate; growth of resource segment to accelerate. According to corporate filings, the company plans to produce 40,000-50,000t of copper in 2025 at the Lonshi copper mine in the Democratic Republic of the Congo (DRC); 10,000-15,000t of copper production at the Dikulushi copper mine in DRC; and around 35,000t of copper metal equivalent at the Cordoba mine in Colombia. The Lubambe copper mine in Zambia is scheduled to produce about 24,000t of copper in 2025. We believe the firm's "services + resources" strategy will help boost its earnings growth.

Financials and valuation

Given increased production and sales volume as well as effective cost control, we raise our 2025 and 2026 net profit forecasts 14% and 7% to Rmb2.24bn and Rmb2.69bn.The A-share stock is trading at 17x 2025e and 14x 2026e P/E. We maintain an OUTPERFORM rating and raise our target price 28% to Rmb73.23, implying 20x 2025e and 17x 2026e P/E and offering 22.5% upside, given earnings forecast revisions and improving market appetite.

Risks

Sharp fluctuations in product prices; disappointing capacity expansion; geopolitical risks in countries where overseas projects are located.