Zijin reported 1H24 earnings of Rmb15,084.4m (+46.6% yoy), representing 53% of our full-year estimate and in line with expectations. Mining entities’ gross margin rose to 57.3% (+5.6ppt), thanks to an uptick in copper/gold prices and cost savings in 1H24. Copper/gold output grew to 518,570 tonnes/35 tonnes (+5.3%/+9.5% yoy), slightly behind the full-year target given interruptions of mine operations. Lithium production will likely be postponed on weak prices. Maintain BUY. Target price: HK$21.50...
KEY HIGHLIGHTS Strategy Cross Currents In our base case, we expect the MSCI China index to range trade for the rest of 2024 due to uncertainties over the duration of economic adjustment. Upside risk comes from the start of the Fed’s easing cycle as it opens the way for further monetary easing in China. However, this should be complemented by demand-side policies for greater impact. In the meantime, we utilise a barbell strategy, preferring TMT, tech hardware and defensives like financials, c...
GREATER CHINA Strategy Cross Currents We expect the MSCI China index to range trade for the rest of 2024; we prefer TMT, tech hardware and defensives like banks, communication services and utilities. Results Goldwind Science & Technology (2208 HK/BUY/HK$4.46/Target: HK$5.30) 1H24: In line; shifting focus to offshore WTG and overseas markets. Jiumaojiu International Holdings (9922 HK/BUY/HK$2.49/Target: HK$3.50) 1H24: Result...
The gold price has been hovering around US$2,300-2,400/t oz in recent months while in search of a catalyst and scrambling for clarity on the rate cut timeline. We believe the PBOC’s de-dollarisation drive is far from over given their relatively low ratio of gold reserves. The value of gold will emerge as China announces more supportive monetary policies. Short-term volatility will persist as the market continues to finetune its rate cut expectations, but stars are aligning for further price upsi...
Zijin reported 1Q24 earnings of Rmb6,260.8m (+15.1% yoy), in line with expectations. Gross margin of mining entities expanded by 0.97ppt yoy to 54.5%, driven by cost savings and a spike in metal prices. Mine-produced copper/gold production volume rose 5.2%yoy/5.3% yoy to 262,649 tonnes/16,805kg, and management is confident of meeting the 10%/9% yoy production growth targets for 2024. There is limited impact from the production halt at the Kolwezi mine. Maintain BUY. Target price: HK$18.10.
KEY HIGHLIGHTS Strategy China And Hong Kong Property A comparison between H-REITs and C-REITs. Results China Tourism Group Duty Free (601888 CH/BUY/Rmb71.72/Target: Rmb106.20) 1Q24: Core profit grew 0.2% yoy; inventories improving; expect further gross margin expansion. iFlytek (002230 CH/HOLD/Rmb41.97/Target: Rmb40.00) FY23 and 1Q24: Earnings missed; dividend of Rmb1.00 for every 10 shares. Jonjee Hi-Tech Industrial & Commercial (600872 CH/BUY/Rmb27.55/Target: Rmb36.10) 1Q24: Results abov...
GREATER CHINA Strategy China And Hong Kong Property A comparison between H-REITs and C-REITs. Results China Tourism Group Duty Free (601888 CH/BUY/Rmb71.72/Target: Rmb106.20) 1Q24: Core profit grew 0.2% yoy; inventories improving; expect further gross margin expansion. iFlytek (002230 CH/HOLD/Rmb41.97/Target: Rmb40.00) FY23 and 1Q24: Earnings missed; dividend of Rmb1.00 for every 10 shares. Jonjee Hi-Tech Industrial & C...
Zijin reported 2023 earnings of Rmb21,119.4m (+5.4% yoy), representing 96%/91 of consensus’/our earnings estimates, in line with expectations. Mining entities’ gross margin declined to 49.1% (-5.2ppt), and the increase in product ASP was offset by a steeper spike in mining costs. Management strives to maintain production costs at 2023’s level while the expected Fed rate cut in 2H24 continues to support metal prices. Maintain BUY. Target price: HK$18.10.
KEY HIGHLIGHTS Results ENN Energy Holdings (2688 HK/HOLD/HK$61.45/Target: HK$69.21) 2023: In line; challenging path ahead. Downgrade to HOLD. Jiumaojiu International Holdings (9922 HK/BUY/HK$5.60/Target: HK$8.20) 2023: Results in line; store opening and SSSG to decelerate in 2024. Q Technology Group (1478 HK/HOLD/ HK$3.03/Target: HK$3.30) 2023: Earnings miss due to non core items, but the worst is over. Sinopharm Group (1099 HK/BUY/HK$20.40/Target: HK$25.00) 2023: Results in line; expe...
GREATER CHINA Results ENN Energy Holdings (2688 HK/HOLD/HK$61.45/Target: HK$69.21): 2023: In line; challenging path ahead. Downgrade to HOLD. Jiumaojiu International Holdings (9922 HK/BUY/HK$5.60/Target: HK$8.20): 2023: Results in line; store opening and SSSG to decelerate in 2024. Q Technology Group (1478 HK/HOLD/ HK$3.03/Target: HK$3.30): 2023: Earnings miss due to non core items, but the worst is over. Sinopharm Group (1099 HK/BUY/HK$20.40/Target: HK$25.00): 2023: Results in line; expecting s...
COMEX gold price fell for a second consecutive week as sticky US inflation dented rate cut expectations. 2023 consumer demand for gold in Mainland China grew 15% yoy, driven by domestic consumers seeking a safe haven from economic anxiety and a weakening renminbi. Chinese gold ETFs’ AUM spiked to a record high of Rmb30b in Jan 24. Gold withdrawals from SGE hit a record high of 271 tonnes in Jan 24, given the industry’s bullish demand outlook. Maintain UNDERWEIGHT on commodities but we are sangui...
Stronger-than-expected 4Q23 US annualised GDP data has pushed back the timeline of the first rate cut. Funds are increasingly bearish on copper, with weak global demand outweighing concerns on supply disruptions. The rebound in flat products’ prices saw steel mills’ margins recovering, but it is unsustainable despite rising production due to weak demand amid the low season. Cement demand was hampered by the first cold snap in 2024, with construction continuing to slow as CNY approaches.
Optimism about a rate cut in Mar 24 faded amid resilient US economic data and hawkish comments from Fed officials, with gold prices sliding to a one-month low last week. The recent sharp declines in iron ore and coke prices have helped in stabilising steel mills’ margins. However, demand for both long and flat products continues to slump amid a low season. We are concerned about reports of the central government instructing heavily-indebted local governments to delay/halt some state-funded infra...
The US’ weaker-than-expected Oct 23 CPI has eased market concerns of further rate hikes by the Fed, dragging the US dollar to a two-month low. Expectations of more stimulus measures from China are boosting demand outlook for industrial metals and iron ore. Steel mills’ margins expansion continued on the rebound of steel prices, though consumption has slowed. Cement shipment slowed as the northern region entered the low season and the southern region encountered rainy weather.
Gold and copper prices gained strength last week with the less hawkish signals from Fed officials and cooling US’ jobs data. Upside for gold prices could be very limited given the declining risk premium on the Israel-Hamas war and rising risk appetite, whereas demand prospects for copper are still clouded by China’s fragile recovery. Domestic construction activities are continuing to gain traction while the recovery in steel prices is driving a margin recovery for both steel mills and cement man...
Zijin reported 9M23 earnings of Rmb16,164.9m (+45.2% yoy), representing 68% of our full-year estimates, in line with expectations. 3Q23 gross margin of mining entities dropped 2.21ppt qoq to 47.7%, largely dragged by the uptick in production costs. Unit cost of sales for mine-produced gold/copper was up 19.2%/15.9% yoy, boosted by the renminbi depreciation, a spike in energy prices, and lower grade ore mined. Maintain BUY. Target price: HK$15.00.
KEY HIGHLIGHTS Strategy Small-Mid Cap Biweekly Pet food exports on track for recovery; beneficiary: Yantai China Pet Food. Results BYD Company (1211 HK/BUY/HK$246.20/Target: HK$630.00) 3Q23: Earnings up 82% yoy and 53% qoq, in line. Maintain BUY. Target price: HK$630.00. China Construction Bank (939 HK/BUY/HK$4.48/Target: HK$6.00) 3Q23: Results in line; earnings up 2.6% on lower credit costs. China Merchants Bank Co. (3968 HK/BUY/HK$30.30/Target: HK$45.00) 3Q23: Results miss; longer wait ne...
The flight to safety and a dovish Fed have continued to weigh on treasury yields, which have declined from its 16-year high to 4.58%. The US’ Sep 23 CPI has stoked expectations of another rate hike in Dec 23. More Chinese steel mills are commencing plant maintenance amid deteriorating margins, which has weighed on iron ore demand prospect. Resumption of construction activities remains still slower than expected, with weekly rebar/cement consumption still down 18% and 36% yoy respectively.
The Israel-Hamas conflict has boosted the appeal of safe-haven assets. Gold has pared some losses in the past few weeks amid a hawkish Fed. US’ Aug 23 nonfarm payroll came in well above expectations at +336,000. However, the weaker-than-expected wage growth of 0.2% mom could be a signal of decelerating inflation. Steel inventory was +6.7% wow and ended its seven consecutive weeks of downtrend. Steel’s apparent consumption and cement shipment was -15.2%/-8.6% wow during Golden Week holidays.
A hawkish Fed, which led to rising treasury yields and a strengthening US dollar, continued to weigh on gold prices, which have been on a losing streak since 25 Sep 23. LME copper saw the widest contango since 1994 with cash-to-three-month discount reaching US$70/mt, partly dragged by concerns on near-term demand. Steel mills saw a steep margin deterioration amid weakening product spot prices and raw material price upticks, which should help moderate production activities.
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