UBS: Luoyang Molybdenum Industry (03993) quarterly results are weak, hampered by sulfur cost pressure and slow cobalt sales

The Zhitong Finance App learned that UBS released a research report saying that Luoyang Molybdenum (03993)'s third quarter results were relatively weak, mainly due to rising copper unit costs and slower than expected cobalt sales progress. The bank believes that the recent stock price correction was overreacted by investors and maintained a “buy” rating, with a target price of HK$32.

Luoyang Molybdenum's net profit for the third quarter fell 6% to 7.9 billion yuan from quarter to 7.9 billion yuan, roughly in line with the bank's estimate of 8 billion yuan, but slightly lower than the market forecast of 8.2 billion yuan. The bank pointed out that rising sulfur-related investment and energy prices put pressure on the unit cost of copper and was one of the main factors that dragged down profits in the third quarter; management said that the progress of cobalt sales was still slower than expected, which was another drag down factor.

Luoyang Molybdenum's copper production in the third quarter was 209,000 tons, up 4% from quarter to quarter, and continued to advance according to plan, bringing production in the first nine months of the year to about 76% of the company's median annual guideline (760,000 to 820,000 tons). Gold production in the third quarter was 1.9 tons, and unit costs rose moderately by about 3% on a quarterly basis.

The bank expects investors to respond broadly neutrally. Although the profit for the third quarter was slightly lower than market expectations, copper production is still on schedule. Currently, risk and return are becoming more attractive, and there is room for valuation to be re-evaluated.