1H25 results slightly miss our forecast

Sinomine Resource Group announced its 1H25 results: In 1H25, revenue rose 34.89% YoY to Rmb3.27bn, and net profit attributable to shareholders fell 81.16% YoY to Rmb89mn. In 2Q25, revenue rose 33.61% YoY and 12.62% QoQ to Rmb1.73bn, and net profit attributable to shareholders fell 121.05% YoY and 133.87% QoQ to -Rmb46mn, missing our expectations as lower lithium prices and losses from copper smelting.

Falling lithium prices weighed on the lithium business. In 1H25, the

firm sold 17,869t of lithium salts and 34,834t of lithium concentrates, and its revenue from the lithium business fell 18% YoY to Rmb1.31bn, mainly due to falling lithium salt prices (the domestic price of battery-grade lithium carbonate fell 32% YoY in 1H25 to Rmb69,925/t). Falling lithium prices weighed on profit of the lithium business, with gross profit declining 75% YoY to Rmb142mn in 1H25.

The sustained profit growth of the rubidium and cesium salt

business provided support. In 1H25, revenue from the rubidium and cesium salt business rose 50.4% YoY to Rmb708mn and gross profit grew 50.2% YoY to Rmb511mn. Specifically, the cesium formate business grew markedly, with gross profit rising 110.6% YoY to Rmb201mn in 1H25.

Losses from copper smelting and processing and inventory

impairment dragged profit. Losses of the copper smelting and processing business in Namibia weighed on profit. Gross profit of the firm's other businesses was -Rmb104mn in 1H25. In addition, the firm recorded Rmb38.82mn of inventory impairment losses, mainly due to falling lithium prices.

Trends to watch Continues to advance copper and minor metal businesses in Africa; expansion of multiple metal-related businesses accelerates.

Lithium business: The company aims to reduce costs and plans to conduct a technological upgrade of its 25,000t/yr production line to control costs.

Minor metals: In 2024, the firm invested in the construction of a 200,000t/yr multi-metal comprehensive recycling project in Namibia with a 　　designed capacity of 33t/yr for germanium, and the installation and construction of the first rotary kiln for the pyrometallurgical process are progressing smoothly.

Copper: The preliminary design work for Phase I of the Kitumba copper mine's mining, beneficiation, and smelting has been completed. The mining and beneficiation projects commenced in March and July 2025 respectively, with the overall construction progress advancing as scheduled. As the germanium recycling project in Namibia and the copper mine project in Zambia gradually complete construction and start operation over 2025-2026, we believe the firm will enter a critical stage of its transformation towards a multi-metal business presence, which may boost its long-term earnings growth and enhance stability of its earnings.

Financials and valuation

We cut our 2025 and 2026 net profit forecasts 40% and 16% to Rmb402mn and Rmb822mn due to losses from copper smelting and falling lithium prices. The stock is trading at 72.8x 2025e and 35.6x 2026e P/E. We maintain our OUTPERFORM rating and target price of Rmb42.01, as the copper and minor metal businesses are likely to ramp up. As 2025 earnings are affected by short-term factors, we roll over valuation to 36.9x 2026e P/E, offering 4% upside.

Risks

Disappointing progress of copper and minor metal projects; sharper-than- expected decline in lithium prices; policy risks related to overseas resources.