According to JPMorgan's research report, the bank maintains its "Overweight" rating on CMOC Group Limited (ASX: 03993) with a target price of HK$25, and keeps a positive view on copper prices.
The bank believes that the company's third-quarter results slightly missed expectations, with cost inflation and cash flow expected to become key investor concerns, and the stock price reaction after the earnings announcement may be relatively muted.
CMOC's third-quarter net profit was RMB 7.9 billion, up 175% year-on-year but down 6% quarter-on-quarter; net profit for the first nine months was RMB 24 billion, up 68% year-on-year, equivalent to approximately 73% of the market's full-year expectation.
The bank noted that the third-quarter results slightly missed expectations, mainly due to higher-than-expected copper unit costs, a 2% quarter-on-quarter decline in copper shipments to 191,000 tonnes, and operating cash flow and free cash flow turning negative in the third quarter.
Third-quarter copper unit cost of sales rose 39% quarter-on-quarter to RMB 45,300 per tonne, causing the copper gross profit margin to decline 5.6 percentage points quarter-on-quarter to 56.5%.
On the positive side, the company's production of major metals including copper, cobalt, and gold in the first three quarters was broadly in line with full-year guidance, and third-quarter cobalt sales volume increased 86% quarter-on-quarter to 6,900 tonnes.
The bank expects that the market's earnings forecasts for the company in 2026 will be slightly revised downward, mainly reflecting higher copper unit cost assumptions, potentially slower recognition of copper and cobalt sales, and weaker cash conversion.
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