Komo: Raise the target price of Zijin Gold International (02259) to HK$165 and reduce the rating of Shandong Gold (01787) to “reduce holdings”

The Zhitong Finance App learned that J.P. Morgan Chase released a research report saying that it has a constructive view on China's basic materials sector until the end of the year because fundamentals are still resilient, but market expectations are weak. In terms of individual stocks, the bank raised the target price of Zijin Gold International (02259) from HK$146 to HK$165, maintaining an “increase” rating; downgraded the rating of Shandong Gold (01787) from “neutral” to “reduced holdings” and the target price from HK$25 to HK$15; Zijin Mining (02899) was the first choice for the copper and gold mining sector, with a rating of “increase holdings” and a target price of HK$50; Jiangxi Copper (00358) maintained a “plus” rating and a target price of HK$44 Yuan; Ganfeng Lithium (01772) maintains “increase in holdings”; target price reduced from HK$70 to HK$40; Tianqi Lithium The business (09696) remained “neutral”, and the target price was reduced from HK$36 to HK$25.

According to the bank, the third quarter's performance so far has recorded a positive return of about 4%, but it lags behind the MSCI China Index (up about 8%), and sentiment is being dragged down by the Fed's uncertainty, risk reduction, and concerns about weakening supply and demand in 2027. The bank expects the industry outlook to receive more support due to continued supply restrictions or disruptions, easing concerns about interest rate hikes, and the policy's continued focus on capacity discipline.

The bank favors copper because profit visibility and supply constraints are more clear than other sub-sectors. Zijin Mining (02899) is the first choice for the copper and gold sector. The current valuation is equivalent to about 8 times the projected price-earnings ratio in 2027 (about 11 times the five-year average). On the gold side, the bank downgraded Shandong Gold (01787). Production guidelines were drastically lowered due to regional security checks, and the impact is expected to continue until 2027. Coal, on the other hand, is still a tactical opportunity as high coal prices continue.

The bank expects quarterly profit growth in the third quarter to be led by coal and followed by copper; aluminum profits may slightly deteriorate, lithium profits are expected to fall due to falling lithium carbonate/spodumene prices, and steel is at the bottom of the material range. The sector preferences are ranked by copper > gold > coal (tactical) > lithium > aluminum > steel in that order.