The outlook for copper and gold is optimistic! Although prices are at historical highs, JP Morgan believes Zijin Mining is "not expensive."

Despite copper prices nearing historical highs, JP Morgan believes that Zijin Mining's stock is still "not expensive" and has given it an "Overweight" rating. Zijin Mining reported record performance for 2024 on the 21st, showing a record net profit of 32.1 billion yuan for the fiscal year, a year-on-year increase of 52%. This performance was mainly driven by strong copper and gold prices and stable production growth. In a research report released on the 25th, JP Morgan stated that gold has become a key profit driver, contributing 32% of gross profit for the fiscal year 2024 (up from 26% in 2023), mainly due to a 28% year-on-year increase in average selling price; copper business gross profit increased by 29%, with average selling price rising by 14% year-on-year. Expected steady growth in gold and copper production, raising the company's A-share target price to 25 yuan/share JP Morgan pointed out that Zijin Mining's unit cost of self-produced copper decreased by 1% year-on-year. Net financial costs fell by 1.2 billion yuan, reducing the borrowing cost rate to 3.8%. It is expected that mining unit costs will slightly rise in 2025 due to increased wage costs and declining grades, but Zijin Mining's good control over sales, management, and financial costs will support robust profit margin performance. Additionally, Zijin Mining plans to achieve stable production growth through mine expansion and potential mergers and acquisitions. The report noted that Zijin Mining has a good track record in mine expansion and has performed excellently in cost control, which will support its compound annual growth rate of 8-10% in the coming years. “It is expected that gold production will reach 85 tons in 2025 (a year-on-year increase of 17%), and copper production will reach 1.15 million tons (a year-on-year increase of 8%). Major mine expansion projects include the third phase of Kamoa (expected to increase production by 32% year-on-year in 2025) and the second phase of the Dragon (expected to commence production by the end of 2025).” According to JP Morgan's valuation model, the target price for Zijin Mining's A-shares is 25.00 yuan, implying a forward P/E ratio of 13 times for one year and an EV/EBITDA multiple of 8.9 times. The target price for H-shares is 23.70 HKD, implying a forward P/E ratio of 12 times for one year and an EV/EBITDA multiple of 7.7 times. JP Morgan believes that despite copper prices nearing historical highs, Zijin Mining's valuation remains attractive. JP Morgan expects Zijin Mining's adjusted earnings per share to grow by 10% and 13% in 2025 and 2026, respectively, mainly due to the positive outlook for copper and gold prices and the company's cost control capabilities