3Q25 results hit record high, beating our expectations

CMOC Group announced its 3Q25 results: In 1–3Q25, revenuefell 6% YoY to Rmb145.5bn and net profit attributable toshareholders grew 73% YoY to Rmb14.3bn. In 3Q25, revenuefell 2% YoY but rose 4% QoQ to Rmb50.7bn, and net profitattributable to shareholders grew 96% YoY and 19% QoQ toRmb5.6bn. The firm’s results beat our expectations, primarilydue to rising sales volume and prices of most metal products.

Output: In 1–3Q25, copper and cobalt output rose 14% and 4%YoY, accounting for 86% and 80% of the median of the firm’sannual guidance; output of other products all exceeded 75% ofthe median of its annual guidance. Sales volume: Copper andcobalt sales volume rose 11% and fell 36% YoY in 1–3Q25,mainly due to the ban on cobalt exports imposed by theDemocratic Republic of the Congo (DRC)1. Prices: According toWind, the average prices of copper, cobalt, molybdenum,tungsten, niobium and phosphorus rose 4%, 15%, 7%, 30%, 8%and 20% YoY in 1–3Q25.

Trends to watch

KFM Phase II plan unveiled; on track to become a worldclassminer driven by organizational upgrading and equityincentive. According to the announcement, 1) the firm releaseda plan for the Phase II KFM project based on its annual copperproduction capacity target of 800,000t–1mnt. The firm expectsthe project to start production in 2027 and add an annualaverage copper metal output of 100,000t after reaching fullcapacity.

2) Following the appointment of four new senior executives inApril, the firm has appointed Mr. PENG Xuhui, an experiencedsenior executive in the advanced manufacturing industry, aspresident and CEO, marking a key milestone in its organizational upgrading.

3) The firm released a blockbuster equity incentive plan on theevening of September 23, proposing to launch an incentive planof 393 million H shares to retain core talent.

Tightening supply and demand dynamics pushed up cobaltprices, boding well for results growth. The DRC’s cobaltquota for 2026/27 accounts for 44% of its 2024 output, andsolid-state batteries will boost the growth potential of demand forternary materials. The tight cobalt supply and demand dynamicswill push up average cobalt prices, in our view. As the companywith the highest quota in the local market, its 2026 quotaaccounts for 32% of the total local quota and 29% of the firm’s2024 sales volume.

Financials and valuation

As the firm has raised prices of major metal products and takenmeasures to reduce costs and improve efficiency, we raise our2025 and 2026 earnings forecasts 26.6% and 32.0% toRmb20.67bn and Rmb27.25bn. The A-share stock is trading at17.4x 2025e and 13.2x 2026e P/E, and the H-share stock istrading at 15.4x 2025e and 11.5x 2026e PE. We maintainOUTPERFORM ratings for both A-shares and H-shares. Weraise our target prices 41% to Rmb20.4 for A-shares,corresponding to 21.1x 2025e and 16.0x 2026e P/E andimplying 21.6% upside. We raise our target prices 41% toHK$19.7 for H-shares, corresponding to 18.7x 2025e and 14.0x2026e P/E, and implying 21.6% upside.

Risks

Policy headwinds in overseas cobalt industry; disappointingprogress of projects; falling metal prices.