Galaxy Securities: Resilience Highlighted, A-Share Non-ferrous Metal Industry Performance Growth Maintains High Growth in Q2 2026

China Galaxy Securities has released a research report stating that resilience is evident, and the A-share non-ferrous metal industry's performance growth rate will maintain high growth in Q2 2026. At the beginning of 2026, optimistic sentiment regarding macroeconomic expectations and liquidity, along with intensified competition for key strategic metals among major powers and the restructuring of supply chains, propelled the prices of non-ferrous metal commodities and the A-share non-ferrous metal sector to continue rising. However, as the Middle East conflict escalated in March, rising oil prices pushed up inflation, leading to concerns about the sustainability of the Federal Reserve's loose monetary policy and an increase in uncertainty about the future economy, which caused a price adjustment in non-ferrous metals at high levels. Previously, the sustained rise in non-ferrous metal prices throughout 2025 resulted in a significant year-on-year increase in the A-share non-ferrous metal industry's performance in the first half of 2026 due to the base effect. The main points of China Galaxy Securities are as follows: Profitability continues to improve, with the overall ROE of the A-share non-ferrous metal industry reaching a historical high in Q2 2026, rising further month-on-month, mainly due to the increase in the industry's overall sales profit margin: the overall ROE of the A-share non-ferrous metal industry rose from 4.76% in Q1 2026 to 5.00% in Q2 2026, an increase of 0.24 percentage points. Among them, the overall sales profit margin of the A-share non-ferrous metal industry increased from 8.04% to 8.27%, contributing 0.14 percentage points to the upward trend of ROE, making it the core factor for the increase in the overall ROE level of the non-ferrous metal industry in Q2 2026. In addition, the overall equity multiplier of the A-share non-ferrous metal industry rose from 2.03 in Q1 2026 to 2.05 in Q2 2026, contributing 0.05 percentage points to the improvement of ROE. The overall asset turnover rate of the A-share non-ferrous metal industry increased from 0.291 in the first quarter of 2026 to 0.295 in the second quarter of 2026, lifting the ROE level by 0.05 percentage points. In Q2 2026, the overall gross margin of the A-share non-ferrous metal industry reached 18.10%, a month-on-month increase of 1.35 percentage points from Q1 2026, which became the main reason for the increase in the sales profit margin of the A-share non-ferrous metal industry in Q2 2026. The overall operating cash flow situation of the A-share non-ferrous metal industry continued to improve in Q2 2026: the overall net operating cash flow of the A-share non-ferrous metal industry grew by 11.58% year-on-year compared to Q2 2025, and increased by 23.19% from Q1 2026. The proportion of operating cash flow to operating income for the A-share non-ferrous metal industry in Q2 2026 was 7.88%, representing an increase of 1.05 percentage points quarter-on-quarter. The growth of operating cash flow in Q2 2026 compared to Q2 2025 marks the second consecutive quarter of year-on-year growth in the overall operating net cash flow of the A-share non-ferrous metal industry since Q4 2025, indicating a continuous improvement in the cash position of non-ferrous metal enterprises. Risk Warning: 1) Risk of the domestic macroeconomic recovery proceeding slower than expected; 2) Risk of tighter monetary policy by the Federal Reserve and interest rate hikes exceeding expectations; 3) Risk of a substantial decline in non-ferrous metal commodity prices; 4) Risk of prolonged and escalating geopolitical conflicts in the Middle East exceeding market expectations.