1H25 results largely in line with our expectation Tongling Nonferrous Metals Group announced its 1H25 results:

Revenue rose 6.39% YoY to Rmb76.08bn, attributable net profit fell 33.94% YoY to Rmb1.44bn, and recurring attributable net profit fell 35.19% YoY to Rmb1.43bn. The company’s 2Q25 attributable net profit fell 71% YoY or 72% QoQ to Rmb312mn, in line with our expectations.

Copper smelting and processing fees fell sharply YoY in 1H25.

Copper and sulfuric acid prices rose YoY in 1H25 and increased QoQ

in 2Q25. Treatment and refining charges (TC and RC) of domestic copper concentrates averaged -US$23.93/dry tonne in 1H25, down sharply from US$14.91/dry tonne in 1H24. The average price of copper in Shanghai rose 4% YoY to about Rmb77,500/t, and that of sulfuric acid rose 87% YoY to Rmb581.74/t. In 2Q25, the average copper price in Shanghai rose 0.9% QoQ to about Rmb78,000/t, staying high, and the price of sulfuric acid rose 26% QoQ to Rmb649.53/t.

Trends to watch Extra income tax expenses due to dividends from subsidiaries have been fully provisioned, boding well for future development. Corporate

income tax was about Rmb2.4bn in 1H25 and reached Rmb1.99bn in 2Q25. According to an announcement in June, the firm’s overseas subsidiaries will recognize income tax of Rmb1.36bn in 2025, affecting attributable net profit of about Rmb952mn in 2025, which we estimate has been fully provisioned in 2Q25 based on an effective tax rate of 27% in 1Q25.

Copper output rose systematically thanks to the commissioning of Phase II project of Mirador copper mine. The Phase I project of the

Mirador mine reached its design capacity in 2021 and has contributed considerable incremental copper concentrate to the firm after the consolidation. The firm’s copper output increased from 51,600t in 2022 to 175,100t in 2023. In June 2025, the Phase II expansion project of Mirador copper mine started full-process trial operation. We estimate that the firm’s own copper output will reach about 300,000t after the Phase II project　　reaches the design capacity. The firm has ranked among the top five in China in terms of copper output.

In terms of profitability, CRCC-Tongguan booked a net profit of Rmb1.48bn in 1H25. At the same time, the group still holds the Panantza and San Carlos mining rights, with estimated mine resources of 463mnt with an average grade of 0.66% and 600mnt with an average grade of 0.59%.

TC and RC of copper smelting has bottomed out YTD; the firm may benefit from its smelting advantage. TC and RC of copper smelting has

bottomed out YTD after hitting -US$45/dry tonne, which rebounded to - US$38/dry tonne as of August 14. We believe the firm boasts advantages in smelting. First, its copper smelting capacity was 1.76mnt in 2024, ranking No.2 in China. It also has a high proportion of long-term orders, and its by-product sulfuric acid output has reached 5.36mnt, which can be deducted from costs. Second, the firm is located in a city cluster in the Yangtze River Delta region of eastern China and thus enjoys a comparative advantage in transportation costs. In addition, eastern China accounts for more than one-third of China’s copper consumption. In 1H25, Jinlong and Jintong smelters recorded net profit of Rmb0.32bn and Rmb0.19bn (-3% and +6% HoH).

Financials and valuation

We maintain an OUTPERFORM rating. Given additional income taxes, we cut our 2025 earnings forecast 17% to Rmb4bn and introduce our 2026 earnings forecast at Rmb5.3bn. We maintain our target price of Rmb5 given that the impact of income tax is a one-off factor. The stock is trading at 13.6x and 10.2x 2025e and 2026e P/E. Out target price implies 15.9x and 12.2x 2025e and 2026e P/E, offering 17.7% upside.

Risks

Disappointing capacity ramp-up of projects; lower-than-expected copper prices; lower-than-expected copper smelting and processing fees.