Following over six months of strong growth, Zhejiang Huayou Cobalt Co., Ltd. (603799.SH) is experiencing signs of profit growth fatigue. On the morning of October 21, the company held a performance briefing for Q3 2025, attended by Chairman Chen Xuehua and management, who addressed related investor questions. According to the Q3 financial report released on October 18, Huayou Cobalt achieved revenue of 21.744 billion yuan, a year-on-year increase of 40.85%; net profit attributable to shareholders was 1.505 billion yuan, up 11.53%. The adjusted net profit attributable to shareholders was 1.425 billion yuan, an increase of 10.52%. The company admitted that the increase in operational performance was primarily due to a rise in product sales, benefiting from ongoing advantages of integrated operations and a rebound in cobalt prices, which bolstered profitability. However, performance in Q3 did not maintain the previous strong momentum, as the heat in the non-ferrous metals sector gradually faded after the National Day holiday, leading to a slowdown in profit growth on a quarter-on-quarter basis.
Under the cyclical dynamics of the industry and stock market trends, the non-ferrous metal sector has entered a new phase of growth. As one of the leading companies in the domestic non-ferrous metals industry, Huayou Cobalt quickly entered a share price uptrend. Following rapid revenue growth in mid-year results, its market capitalization surged back to the trillion-yuan level, reaching an all-time high of 73 yuan per share on October 14. Experts indicated that Huayou Cobalt's price surge was not merely a short-term market sentiment phenomenon, but was influenced by an interplay of macro cycles, geopolitical factors, and fundamental industry shifts. “The share price increase was driven 70% by operational alpha factors of the company, while 30% stemmed from the cyclical beta of the metals industry, particularly the rising cobalt prices,” the expert further analyzed, stressing that a key factor driving Huayou Cobalt’s value was a cobalt export restriction from the Democratic Republic of Congo (DRC).
Regarding the elevation in share prices this year, Huayou Cobalt pointed out that their stock is influenced by various factors including market trends, secondary market trading, the company's fundamentals, and industry conditions. In February, the DRC government announced a four-month ban on cobalt exports in response to the global oversupply crisis, as cobalt prices had already dropped to a nine-year low at that time. This ban has been extended three times, including postponements in June and September. As of September, the DRC announced that starting October 16, cobalt export restrictions would shift to an annual quota management system, implementing export limits. According to the new quota rules, the cobalt export ceiling for the remainder of 2025 is set at 18,125 tons, with monthly distributions of 3,625 tons in October, 7,250 tons in November, and 7,250 tons in December. The annual quotas for 2026-2027 are set at 96,600 tons, including a base quota of 87,000 tons and a strategic quota of 9,600 tons. The DRC has disclosed details of the export quotas for mining companies, with companies like Luoyang Molybdenum, Glencore, and Eurasian Resources obtaining the leading shares, collectively accounting for 62%. In contrast, Huayou Cobalt’s share is much smaller, at only 1.2% of the total quota.
As the world’s largest cobalt producer, every policy adjustment made by the DRC has profound implications for the global cobalt industry. Data from Dongwu Securities indicates that the DRC supplies more than 70% of the world's cobalt, hence its policy changes directly impact global cobalt supply, prices, and corporate profitability. With the lifting of the ban and the gradual implementation of the quota policy, cobalt prices have surged globally. As of October 20, data from the London Metal Exchange show that cobalt prices rose from $37,787 per ton at the end of September to $44,290 per ton, marking a 17.2% increase. Compared to the average cobalt price of $20,000 per ton at the beginning of the year, this increase surpasses 121.5%.
It’s noted that Huayou Cobalt is not a major supplier of cobalt resources from the DRC, as the company primarily relies on its nickel projects in Indonesia. Experts believe that although Huayou Cobalt may face minimal direct impacts from the DRC’s quota policy, tighter cobalt supply could maintain elevated cobalt prices, enhancing profit margins. It is important to note that while Huayou Cobalt is not the sole player in the global cobalt supply chain, their cost-effective, large-scale leaching processes in Indonesia allow them to effectively benefit from increased cobalt prices.
For the industry as a whole, the DRC's quota mechanism exacerbates the global cobalt shortage, propelling cobalt prices into an upward cycle. When discussing the impact of the DRC's quota system on performance, Huayou Cobalt stated that the long-term trends in cobalt prices are fundamentally determined by supply and demand dynamics. The quota policies of major supplying countries lead to significant supply contractions, with existing gaps in demand, suggesting that cobalt prices may continue to improve. “Currently, cobalt remains an essential material for consumer electronics battery materials and ternary power battery materials. An increase in cobalt prices will have a positive impact on the company’s operating results,” the company stated.
Despite achieving record high revenues, Huayou Cobalt experienced slower profit growth in Q3. According to its Q3 report, the company achieved revenues of 58.941 billion yuan for the first three quarters, a year-on-year increase of 29.57%; net profit attributable to shareholders was 4.216 billion yuan, up 39.59%; adjusted net profit was 4.012 billion yuan, a growth of 31.92%. In Q3 alone, the company recorded revenues of 21.744 billion yuan, a remarkable year-on-year increase of 40.85%, marking the highest revenue growth in nearly ten quarters. Chairman Chen Xuehua acknowledged the company’s developmental achievements, noting, “The net profit attributable to shareholders for Q3 was 1.505 billion yuan, setting a new historical high for a single quarter in nearly three years.” However, alongside these peaks, the marginal slowdown in profit generation has emerged as a shadow behind the spotlight.
Breaking it down by quarter, Huayou Cobalt's revenues have shown continuous growth: 17.84 billion yuan in Q1, 19.36 billion yuan in Q2, and 21.74 billion yuan in Q3, with quarter-on-quarter growth rates of 8.52% and 12.29%, respectively. However, profit growth has begun to decelerate, with net profits attributable to shareholders recorded at 1.252 billion yuan, 1.459 billion yuan, and 1.505 billion yuan, showing a drastic decrease in quarter-on-quarter growth from 16.53% in Q2 to 3.15% in Q3. This indicates that while revenue curves are accelerating, profit curves are flattening. The gross profit margin for the first three quarters was 16.18%, slightly down from 17.53% in the same period last year. In response, Wang Jun, the senior vice president and CFO of Huayou Cobalt, explained that the lag in the transmission of increasing cobalt prices to precursor prices usually exceeds one month.
He further explained, “The primary reasons for revenue growth outpacing profit growth in Q3 stemmed from changes in product structure, with increased revenue mainly derived from a significant surge in shipments of cathode materials and sales of nickel-iron, both of which tend to have relatively lower gross margins.” In fact, the rise in cobalt prices began in late September, and the lag in transmission limited its contribution to Q3 profits. Wang anticipates that this price increase will have a positive impact on subsequent gross profit margins for cobalt products.
In terms of industry positioning, Huayou Cobalt's recovery in profits is lagging behind that of some peers. For instance, Luoyang Molybdenum, which also benefits from the DRC’s quota management system, reported cobalt product revenues of 5.728 billion yuan, accounting for 6.04% of total revenue, with a profit contribution of 17.67% and a gross margin of 61.83%. In contrast, during the same period, Huayou Cobalt's cobalt product revenue only constituted 3.33% of total revenues, with a profit contribution of 6.78% and a gross margin of 32.25%, illustrating a sharp decline.
This disparity reflects differences in industry structure and sensitivity to cyclical changes. Huayou Cobalt's primary business structure is focused on cathode materials and nickel-related products, which has limited their benefits in the current cobalt price cycle. Historically, the non-ferrous metals industry has shown strong volatility. Over the past decade, Huayou Cobalt has experienced three distinct phases of performance fluctuations, going from a loss of 246 million yuan in 2015 to a profit of 1.893 billion yuan by 2017 due to rising cobalt prices, and then seeing net profit fall from 1.528 billion yuan to 119 million yuan from 2019 to 2022 as cobalt prices dropped, compounded by adjustments in the new energy industry.
Currently, regarding the development of their lithium iron phosphate business, Wang Jun stated that the integration of lithium carbonate operations is yielding overall profits. To date, Huayou Cobalt has established a footprint in lithium battery recycling, with subsidiaries including Huayou Quzhou, Resource Recycling, and Jiangsu Huayou participating in the first, second, and fourth batches of companies recognized by the Ministry of Industry and Information Technology under the “Comprehensive Utilization Industry Standards for Used Power Batteries of New Energy Vehicles.”
As of market close on October 23, Huayou Cobalt's A-shares were priced at 62.75 yuan, up by 1.70%. However, the stock has recently undergone a total correction over the past six trading days, falling about 14.04% from its peak of 73 yuan. Faced with a complex and changing macro environment, intense competitive dynamics within the industry, and uncertainties in the internationalization process, Huayou Cobalt has indicated its intention to continue actively engaging in overseas resource allocation, integrating into international industry divisions, and joining global market competition to drive high-quality growth through internationalization.
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