JP Morgan: China's materials sector is expected to see profits, with a preference for copper and gold stocks.

JPMorgan released a research report stating that in the basic materials sector in China, copper, gold, aluminum, lithium, and some coal companies are expected to release positive earnings, and they believe investors will gradually shift their focus back to profitability and fundamental supply-demand factors in the future. JPMorgan's preferred order for sub-sectors is copper > gold > aluminum > lithium > coal > steel, believing that the valuation of copper and gold stocks has been adjusted downward in anticipation of increasing interest rates, but the physical fundamentals remain strong. Regarding the copper sector, JPMorgan expects MMG (01208), CMOC Group Limited (03993), Jiangxi Copper (00358), and Zijin Mining Group (02899) to see year-on-year profit growth of 120%, 94%, 92%, and 79% respectively in the first half of the year, benefiting from a 31% and 163% year-on-year increase in copper prices and sulfuric acid prices on the Shanghai Futures Exchange, respectively. The target price for Zijin Mining Group has been lowered from 55 HKD to 50 HKD, CMOC Group Limited from 28 HKD to 25 HKD, Jiangxi Copper from 51 HKD to 44 HKD, and MMG's target price remains at 13 HKD, with all ratings being "hold". JPMorgan has significantly reduced the target price of Zijin Gold (02269) from 240 HKD to 170 HKD, with a "hold" rating, expecting an average annual compound growth rate of profits of around 42% from 2025 to 2028; the target price of Shandong Gold Mining (01787) has been lowered from 35 HKD to 22.5 HKD, maintaining a "neutral" rating, believing that its profit growth primarily comes from gold prices rather than operational improvements. In the aluminum sector, JPMorgan believes that market concerns about Indonesian aluminum supply are excessive, and has lowered the target price of Aluminum Corporation Of China (02600) H shares from 16 HKD to 12 HKD, maintaining a "hold" rating, believing that domestic aluminum companies have potential for revaluation compared to global peers. In the lithium sector, JPMorgan expects Ganfeng Lithium Group (01772) to benefit from strong growth in battery business and an upward trend in lithium carbonate prices. They have upgraded their investment rating from "neutral" to "hold" and maintained a target price of 70 HKD; the target price of Tianqi Lithium Corporation (09696) has been reduced from 52 HKD to 36 HKD, with a "neutral" rating, reflecting an expected adjustment in A/H premium. In the coal and steel sector, China Shenhua Energy (01088) and Yankuang Energy Group (01171) maintain a "neutral" rating, with a target price of 44.5 HKD for Shenhua and a target price of 12.5 HKD for Yankuang (down from 14 HKD); Angang Steel (00347) maintains a "sell" rating, with the target price lowered from 1.3 HKD to 0.8 HKD. The bank expects continued losses in 2026-2027.