Bank of America Securities released a research report stating that it maintains Zijin Mining's (02899) “buy” rating, with a target price of HK$21. The bank expects spot copper and gold prices to increase 14% from the average price in the first quarter of this year, and believes Zijin's strong profit momentum will continue in the second quarter. According to the bank's forecast model, every 1% increase in copper/gold prices will cause Zijin's net profit after tax to increase by 1.1%/0.7% this year.
The report mentioned that the company's first-quarter results were in line with expectations. Net profit after tax was RMB 6.3 billion, up 15% year on year and 26% month on month, reaching 22% and 23% of the bank and market's forecast for the company for the whole year; revenue reached RMB 75 billion, down 0.2% year on year and 9% month on month. The overall gross profit was RMB 11.2 billion, up 6% year on year and 3% month on month. The bank believes that the quarterly increase in Zijin's profit is mainly a rise in metal prices since the first quarter of this year; unit costs have decreased month-on-month, including year-end expenses; and production increases due to continued increases in mine production and mergers and acquisitions.