2024 results slightly beat our expectations

CMOC Group announced its 2024 results: Revenue rose 14.4% YoY to Rmb213bn, and attributable net profit rose 64% YoY to Rmb13.5bn. In 4Q24, revenue grew 6.8% YoY and 12.2% QoQ to Rmb58.3bn. Attributable net profit fell 9.4% YoY to Rmb5.3bn (+84% QoQ). The firm's results beat our expectations mainly due to the early recognition of sales of some in-transit inventory in 4Q24 and improved effective tax rates.

CMOC Group ranked among the top 10 globally in copper output for the first time. Earnings hit a new high driven by rising sales volume and higher prices of copper products. The firm's copper and cobalt output in 2024 rose 55% and 106% YoY to 0.65mnt and 114,165t, 119% and 176% of the medians of its annual guidance ranges.

The firm's sales volume of copper and cobalt rose 66% and 266% YoY to 0.69mnt and 108,892t in 2024. The sales-output ratio of copper reached 106%, as the firm recognized sales of in-transit inventory in 4Q24 after agreeing that Gécamines, a minority shareholder of the TFM copper-cobalt mine in the Democratic Republic of Congo (DRC), will be entitled to 20% of the total value of the project's subcontracting1.

iFinD data shows that average prices of copper and MB cobalt at the London Metal Exchange (LME) recorded an increase of 9% YoY and a decline of 25% YoY in 2024.

Efforts to improve efficiency in the molybdenum, tungsten, niobium, and phosphorus segments paid off. Full-year output exceeded guidance. According to corporate filings, the output of molybdenum, tungsten, niobium, and phosphorus recorded a decline of 2% YoY, an increase of 4% YoY, an increase of 5% YoY, and an increase of 1% YoY, respectively, in 2024, 114%, 118%, 106%, and 103% of the medians of the firm’s annual guidance ranges.

Data from iFinD shows that average prices of molybdenum concentrates, tungsten concentrates, ferroniobium, and monoammonium phosphate in the domestic market recorded a decline of 6% YoY, an increase of 14% YoY, a decline of 2% YoY, and an increase of 8% YoY, respectively, in 2024. In 2024,　GMs of molybdenum, tungsten, niobium, and phosphorus at the company recorded a decline of 5ppt YoY, an increase of 6ppt YoY, an increase of 3% YoY, and an increase of 8% YoY, respectively.

Trends to watch

Earnings and valuation of the cobalt business to increase. Development of world-class mines bodes well for expansion of production capacity.

The firm estimates copper output at 600,000-660,000t and cobalt output at 100,000-120,000t for 2025, largely flat with the output in 2024.

Cobalt prices are experiencing a rebound, as DRC imposed a four-month cobalt export ban on February 24, 20252. Given the strategic importance of cobalt resources, we think that DRC will continue to take measures to control the sales volume of cobalt and raise prices of this product after the temporary ban expires.

We expect demand for cobalt to stabilize, and the average price of cobalt and the average valuation of the cobalt sector to increase systematically. Against this backdrop, we think that the sales volume of cobalt at the company may come under pressure, but prices of cobalt may increase notably. Overall, we expect earnings and valuation of the cobalt business to increase.

The firm announced that it would step up exploration of copper and cobalt mines and advance development of local power projects, laying a foundation for a new round of capacity expansion.

Financials and valuation

The company expects the sales of assets to generate net financial income of about Rmb1.5bn in 2025. Given higher cobalt prices, we raise our 2025 net profit forecast 23% to Rmb15.3bn (we lift our 2025 operating profit forecast 10% excluding the impact of one-off disposal gains) and introduce our 2026 net profit forecast at Rmb17bn.

A-shares are trading at 10.7x 2025e and 9.7x 2026e P/E, and H-shares are trading at 8.1x 2025e and 7.2x 2026e P/E. We maintain OUTPERFORM ratings for A-shares and H-shares. We lift our target price for A-shares 7% to Rmb11.1 to reflect higher earnings forecasts and valuation of the cobalt business. Our TP implies 15.6x 2025e and 14x 2026e P/E, offering 45% upside. We lift our TP for H-shares 9% to HK$9.4. Our TP implies 12.4x 2025e and 11x 2026e P/E, offering 53% upside.

Risks

Falling metal prices; disappointing progress in projects; increased geopolitical tension.