$JIANGXI COPPER (00358.HK)$ KGI has a TA target of HKD13.70....

KGI has a TA target of HKD13.70.

It is principally engaged in the mining, smelting and processing of copper. The Company is also engaged in the extraction and processing of precious metals and dissipated metals, sulfur chemical industry business, and financial and trading businesses. The company's products include cathode copper, gold, silver, sulfuric acid, copper rods, copper foils, selenium, tellurium, rhenium, bismuth and others. The Company mainly conducts its businesses within Mainland China and Hongkong.

China bailing out the property market. The People's Bank of China and the China Banking and Insurance Regulatory Commission jointly issued a notice to financial institutions laying out plans to ensure the "stable and healthy development" of the property sector in Dec. The notice includes 16 measures that range from addressing the liquidity crisis faced by developers to loosening down-payment requirements for homebuyers. Meanwhile, developers' outstanding bank loans and trust borrowings due within the next 6 months can be extended for a year, while repayment on their bonds can also be extended or swapped through negotiations. The authorities also told the nation's second-tier banks to dole out another RMB 400b (USD56b) of financing for the property sector in the final 2 months of 2022.

Copper prices rallied and the dollar index fell. Copper futures closed at USD413.6/pound, last June's level, and the dollar index pulled back to 102.4. China has released supportive policies for the property market, and the construction activities will widely resume after Chinese New Year. On the other hand, China is expected to continue its infrastructure expansion, especially the renewable energy segment. Both catalysts are tailwinds for the commodities market as both positive pricing and demand factors are expected to uphold the near-term recovery of the metal market.

Copper futures seasonality. Copper performs the best in Feb in a year based on the last 15-year's track record.

3Q22 operating revenue grew by 2.2% yoy to RMB112.9bn. Net profit attributable to shareholders of the company dropped by 13.8% yoy to RMB1.3bn. 9M22 operating revenue grew by 9.2% yoy to RMB368.2b. Net profit attributable to shareholders of the company increased by 4.9% yoy to RMB4.8b.

The updated market consensus of the EPS growth in FY22/23 is -3.8%/-23.8% yoy respectively, which translates to 6.2x/8.1x forward PE. The current PER is 5.7x. Bloomberg consensus average 12-month tp is HKD11.36.