Jiangxi Copper’s 2018 Earnings Hit by Impairment Losses and Rising Costs; Unexciting Growth Prospect
No-moat Jiangxi Copper’s, or JC’s, 2018 net profit of CNY 2.42 billion, up 46% year over year, was within preliminary guidance but trailed our expectation mainly due to impairment losses on financial assets amounting to CNY 1.37 billion. Stripping these off, JC’s earnings should be largely in line with our expectation. Nonetheless, JC’s core earnings declined year over year due to rising costs with gross margin falling to 3.2% from 4.2%, a year ago. After rolling forward our earnings model, we r...Jiangxi Copper is engaged in copper mining, milling, smelting and refining for the production of copper cathodes, copper rods and wires and other related products, including pyrite concentrates, sulphuric acid, and electrolytic gold and silver, and rare metals such as molybdenum; provision of smelting and refining services. Through its subsidiaries, Co. is engaged in trading of sulphuric acid and other chemical products; production and sale of copper materials and precious metal materials, and mining equipment; overseas futures business and related enquiry services and businesses; construction and installation services; and development and sale of construction materials.
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