J.P. Morgan: Raises ZIJIN GOLD INTL (02259) target price to HK$165; downgrades Shandong Gold Mining (01787) to "Underweight"

J.P. Morgan released a research report stating that it holds a constructive view on China's basic materials sector through year-end, as fundamentals remain resilient, though market expectations are relatively weak. On individual stocks, the bank raised its target price for ZIJIN GOLD INTL (02259) from HK$146 to HK$165, maintaining an "Overweight" rating; downgraded Shandong Gold Mining (01787) from "Neutral" to "Underweight," cutting its target price from HK$25 to HK$15; named Zijin Mining Group (02899) as its top pick in the copper and gold mining sector, with an "Overweight" rating and a target price of HK$50; maintained an "Overweight" rating on JIANGXI COPPER (00358) with a target price of HK$44; maintained an "Overweight" rating on Ganfeng Lithium Group (01772), lowering its target price from HK$70 to HK$40; and maintained a "Neutral" rating on Tianqi Lithium Corporation (09696), lowering its target price from HK$36 to HK$25. The bank noted that the sector has still delivered a positive return of about 4% quarter-to-date, but has lagged the MSCI China Index (up about 8%), with sentiment weighed down by Federal Reserve uncertainty, de-risking, and concerns over weakening supply-demand in 2027. The bank expects the sector outlook to gain more support from persistent supply constraints or disruptions, easing rate hike concerns, and continued policy focus on capacity discipline. The bank prefers copper, as earnings visibility and the degree of supply tightness are clearer than in other sub-sectors. Zijin Mining Group (02899) is its top pick in the copper and gold mining sector, currently trading at about 8x 2027 forecast P/E (versus a five-year average of about 11x). On gold, the bank downgraded Shandong Gold Mining (01787) due to a significant cut in production guidance caused by regional safety inspections, which it expects to persist into 2027. Coal remains a tactical opportunity amid sustained high coal prices. The bank expects quarter-on-quarter earnings growth in the third quarter to be led by coal, followed by copper; aluminum profits may edge slightly lower, lithium earnings are expected to decline on falling lithium carbonate/spodumene prices, and steel is expected to be at the bottom of its coverage. The sector preference ranking is copper > gold > coal (tactical) > lithium > aluminum > steel.