Bank of America Securities: Luoyang Molybdenum (03993) renews “buy” rating after winning profit expectations for the second quarter

The Zhitong Finance App learned that Bank of America Securities released a research report stating that it maintains the Luoyang Molybdenum Industry (03993) “buy” rating, with a target price of HK$22. Luoyang Molybdenum announced Yingxi. Net profit attributable to shareholders for the first half of 2026 is estimated to be 15.5 billion to 16.5 billion yuan, an increase of 79% to 90% year-on-year. According to this estimate, net profit for the second quarter was about 7.7 billion yuan to 8.7 billion yuan, up 64% to 85% year-on-year, with a quarter-on-month change of 0% to 13%. The performance was superior to market expectations, as investors previously worried about the potential impact of rising sulfur costs on profit margins.

The bank believes that the resilience of the second quarter's performance reflects the combined effects of the following factors: increased copper production, which reached 388,000 tons in the first half of the year, up 9.7% year on year; estimated production of 200,000 tons in the second quarter, up 6% from quarter to quarter; copper and molybdenum prices rose quarterly; effective control of sulfur costs through a three-month inventory cycle; and the consolidation of Brazilian gold assets contributed one month more to profit than in the first quarter. Some of the positive factors were offset by the assumption that the Democratic Republic of the Congo (DRC) copper super tax provision was made up of lower tungsten and gold prices during the quarter.

Bank of America is optimistic about copper price resilience, production growth, and valuation attraction. It expects copper prices to be 12,900 US dollars and 15,200 US dollars per ton in 2026 and 2027, respectively, and expects TFM and KFM mines to expand production to 800,000 to 1 million tons by 2028. The current price of the stock corresponds to about 8 times the predicted price-earnings ratio in 2027, and the valuation is still not expensive. Looking ahead, based on advanced accounting and a three-month inventory cycle, the bank expects the impact of sulfur costs to be more obvious in the third quarter, but continued strong quarterly increases in metal prices, cost control and cobalt sales may partially offset the impact.