The report from "The Big Banks" predicts that the market environment will continue to be favorable for pure gold mining stocks such as ZHAOJIN MINING, while there remains uncertainty regarding marine projects

HSBC Research published a report indicating that ZHAOJIN MINING (01818.HK) achieved a net profit after tax of RMB 3.614 billion last year, an increase of 149% year-on-year, meaning that the profit for the fourth quarter reached RMB 1.5 billion, up 163% year-on-year and 121% quarter-on-quarter, roughly in line with expectations. The strong performance was mainly attributed to rising gold prices, an approximately 8% year-on-year increase in gold production, and gains from the fair value of financial assets. The company declared a final dividend of RMB 0.1 per share, with a payout ratio of about 10%.

The report pointed out that ZHAOJIN did not provide the latest updates on the offshore gold mine in its annual report. The last update was in the first half of last year when the processing system successfully completed a one-time trial run, paving the way for commercial production. The bank currently expects that there will be no production contribution from the offshore mine in 2026, and it is anticipated that production will not begin until 2027. The company guided that total gold production (including refined gold) in 2026 will not be less than 25.9 tons, lower than 27.2 tons in 2025.

The bank believes that the market environment will continue to be favorable for pure gold mining stocks like ZHAOJIN. Although gold prices have recently corrected about 15% from historical highs due to a stronger dollar and rising bond yields, given the tense situation in the Middle East, gold prices may still fluctuate in the short term. However, supported by structural de-dollarization and central banks' ongoing diversification of reserves, gold prices are expected to remain strong in the medium to long term. Additionally, benefiting from future contributions from the offshore project and strategic cooperation with Zijin Mining, ZHAOJIN's operational outlook remains positive.

The bank maintains a "Buy" rating on ZHAOJIN, with a target price unchanged at HKD 37.1. After incorporating the 2025 performance and 2026 guidance, the earnings expectations for the next two years have been revised down by 6% and 3%, respectively