Key Takeaways
Bank of America Securities trimmed its target price for Jiangxi Copper Co. Ltd. (00358.HK) to HKD52 from HKD56, citing lower near-term profit forecasts, but reiterated its "Buy" rating on the stock.
The investment case is supported by strong sulfuric acid prices, resilient copper prices, and long-term growth in self-produced copper concentrate, the bank said in a research report.
BofAS reduced its net profit forecasts for Jiangxi Copper for fiscal years 2026 and 2027 by 14% and 21%, respectively, to reflect year-to-date performance and new production guidance. The new profit estimates are RMB10.5 billion for FY2026 and RMB11.4 billion for FY2027. The bank also lowered its target for the company's A-shares (600362.SH) to RMB63 from RMB68.
The reiterated "Buy" rating comes despite spot treatment and refining charges (TC/RCs) falling to a historic low of negative USD78 per tonne, an environment that typically pressures smelter margins.
Jiangxi Copper's management expects the impact from negative TC/RCs to be limited, as the majority of its smelting capacity operates under long-term contracts where the charges are set at "0". This, combined with strong prices for sulfuric acid, a byproduct of the smelting process, is expected to support earnings.
The bank’s bullish long-term outlook is underpinned by its global team's copper price forecasts. They project copper prices will reach USD13,187 per tonne in 2026 and USD15,500 in 2027, representing year-over-year increases of 32% and 18%. Analysts noted that prices could see further upside if supply disruptions emerge, given that sulfuric acid inventories at African smelters are only sufficient for about one month.
Management also reiterated a focus on market capitalization management. While Chinese authorities are tightening controls on new smelting capacity, the report noted there is no news of any government-mandated production cuts for existing operators.
The "Buy" thesis hinges on the combination of high byproduct prices and a strong copper market offsetting near-term headwinds. Investors will watch for any signs of government-mandated production cuts or further volatility in TC/RCs.
This article is for informational purposes only and does not constitute investment advice.
