According to a UBS research report, CMOC (ASX: 03993) reported relatively soft third-quarter results, mainly due to rising copper unit costs and slower-than-expected cobalt sales progress. The bank believes the recent share price pullback reflects an overreaction by investors and maintains its "Buy" rating with a target price of HK$32.
CMOC's third-quarter net profit fell 6% quarter-on-quarter to RMB 7.9 billion, broadly in line with the bank's estimate of RMB 8 billion but slightly below market expectations of RMB 8.2 billion.
The bank noted that rising sulfur-related input costs and energy prices put pressure on copper unit costs, which was one of the main drags on third-quarter earnings. Management stated that cobalt sales progress remains slower than expected, which was another drag factor.
CMOC's third-quarter copper production reached 209,000 tonnes, up 4% quarter-on-quarter, continuing to advance according to plan, bringing first-nine-month output to approximately 76% of the midpoint of the company's full-year guidance range of 760,000 to 820,000 tonnes.
Third-quarter gold production was 1.9 tonnes, with unit costs rising modestly by about 3% quarter-on-quarter.
The bank expects a broadly neutral investor reaction. Although third-quarter earnings came in slightly below market expectations, copper production remains on track, and the current risk-reward profile is increasingly attractive with room for valuation re-rating.
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