Jiangxi Copper’s 2016 Earnings Miss on Impairment Loss; Increasing FVE to HKD 8.20
No-moat Jiangxi Copper’s, or JC’s, 2016 net profit of CNY 841 million, up 22% year over year, was dampened by impairment and hedging losses. If we strip these out, JC’s earnings were above expectations owing to higher-than-expected margins achieved, especially for gold and copper processing products. We increase our 2017 earnings forecast by 38% to take into account the near-term margin improvements. We also raise our fair value estimate to HKD 8.20 per share (CNY 7.30) from HKD 7.30 (CNY 6.50)....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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