3Q24 results in line with our expectations

CMOC announced its 3Q24 results: In 1-3Q24, revenue rose 18% YoY to Rmb154.8bn, attributable net profit grew 239% YoY to Rmb8.3bn, and recurring attributable net profit increased 531% YoY to Rmb8.6bn. In 3Q24, revenue rose 16% YoY or fell 8% QoQ to Rmb51.9bn, attributable net profit grew 64% YoY or fell 15% QoQ to Rmb2.9bn, and recurring attributable net profit grew 158% YoY or fell 17% QoQ to Rmb2.9bn. The firm's results were in line with our expectations.

Copper and cobalt segments maintain stable production; GM fell QoQ in 3Q24 due to falling prices. According to the announcement, the firm's copper and cobalt output rose 78% and 127% YoY to 476,049t and 84,722t in 1- 3Q24, 84% and 121% of the upper limit of its 2024 output guidance, thanks to the implementation of important TFM projects, KFM's monthly output hitting new highs, technological improvements, and continuous optimization of technological processes. In 3Q24, copper output increased 46% YoY and fell 2% QoQ, and cobalt output grew 72% YoY and 7% QoQ. According to iFinD, average LME copper and MB metal cobalt prices fell 6% and 11% QoQ in 3Q24. As a result, the firm's copper and cobalt GM fell 3ppt and 21ppt QoQ.

Efficiency improvement and management of molybdenum, tungsten, niobium, and phosphorus segments paid off, and their output goal completion rates were high in 1-3Q24. According to the announcement, the output of molybdenum fell 6% YoY, while that of tungsten, niobium, and phosphorus rose 4%, 5%, and 2% YoY in 1-3Q24, implying completion of 76%, 82%, 76%, and 72% of the upper limits of 2024 output guidance.

According to iFinD, the ASP rose 1% QoQ for molybdenum concentrates, fell 6% QoQ for tungsten concentrates, fell 1% QoQ for international ferroniobium, and rose 11% QoQ for monoammonium phosphate in 3Q24, and GM fell 2ppt QoQ for the firm's molybdenum, rose 5ppt QoQ for tungsten, fell 0.3ppt QoQ for niobium, and grew 13ppt QoQ for phosphorus.

Trends to watch

Full-year copper output to exceed planned target; 5-year development plan on track. According to the announcement, as of 3Q24, the firm's two world-class copper mines, TFM and KFM, had 450,000 tonnes and 150,000 tonnes of copper production capacity. The company expects to maintain the current production pace in 4Q24, and its annual copper output may exceed 600,000 tonnes in 2024, up over 52% compared with last year's copper output　growth in the Democratic Republic of the Congo.

Moreover, the firm is planning a new round of development, as it has made steady progress towards its target of increasing copper production capacity to 800,000-1mnt within five years set at the beginning of this year. During the reporting period, two new projects, TFM West and KFM Phase II, started preliminary exploration, and the results were encouraging. The firm has signed a cooperation agreement on the Nzilo II hydropower station in the Democratic Republic of the Congo. Its 200MW power generation capacity should provide long-term stable power supply for a new round of capacity expansion. Looking ahead, the firm plans to continue following the growth pattern of the mining industry, focus on projects with competitive costs, and expand its high-quality resources and project reserves through various means.

Financials and valuation

We keep our 2024 and 2025 earnings forecasts largely unchanged. The A- share stock is trading at 13.9x 2024e and 13.7x 2025e P/E, and the H-share stock is trading at 10.7x 2024e and 10.3x 2025e P/E. We maintain OUTPERFORM ratings for both A-shares and H-shares. We keep our target price of Rmb10.40 for A-shares, implying 18.2x 2024e and 18.0x 2025e P/E, offering 31% upside, and HK$8.64 for H-shares, implying 13.7x 2024e and 13.1x 2025e P/E, offering 28% upside.

Risks

Falling metal prices; disappointing project progress and/or sales volume.