Why did third-quarter results miss expectations despite year-on-year growth?

  • Zijin Mining reported net profit of 57.5 billion yuan for the first three quarters of 2026, up 51.9% year on year. Third-quarter net profit was 18.4 billion yuan; although it rose 26% year on year, it fell 3.8% quarter on quarter and missed Morgan Stanley’s expectations. Strong cumulative growth coincided with weaker quarterly earnings.
  • Recurring net profit in the third quarter was 17.8 billion yuan, up 42.4% year on year and down 9% quarter on quarter, a larger sequential decline than that of net profit. Morgan Stanley assessed the results as slightly below market consensus and expects consensus earnings per share estimates to be revised down slightly over the next 12 months.

Why could improved copper performance not support overall profit?

  • Higher gold sales were offset by lower prices and rising costs. Third-quarter gold sales volume rose 2.7% quarter on quarter, but the selling price fell 9.1%, while unit costs rose to 313 yuan per gram, up 2.2% quarter on quarter and 11.9% year on year. Gold gross profit consequently fell by about 1.74 billion yuan quarter on quarter to 12.55 billion yuan.
  • Copper, by contrast, saw both volume and prices rise: third-quarter sales volume increased 3.4% quarter on quarter and the average selling price rose 5%, lifting gross profit by about 1.26 billion yuan to 14.83 billion yuan. Comparing gold and copper alone, the increase in copper gross profit was still insufficient to make up for the decline in gold gross profit.
  • Improved copper profitability also came with cost pressure: third-quarter unit costs rose to 29 thousand yuan per tonne, up 3.6% quarter on quarter and 14.4% year on year. Quarterly copper production was 281 thousand tonnes, up 6.9% year on year; cumulative production for the first three quarters was 816 thousand tonnes, down 1.7% year on year, but up 6.1% excluding KK production. The basis of comparison materially changes the assessment of growth.

Why did profit fall despite the rapid ramp-up in lithium production?

  • Third-quarter lithium production reached 35.5 thousand tonnes of lithium carbonate equivalent, up 29.9% quarter on quarter, but sales were only 26.8 thousand tonnes. For the first three quarters, cumulative production was 79.1 thousand tonnes and sales were 63 thousand tonnes. Sales lagged production, and the production ramp-up had not yet fully translated into sales volume.
  • Lower prices further weakened the effect of higher volumes. Morgan Stanley said the impact of falling lithium prices outweighed the benefits from higher concentrate sales and cost savings. Third-quarter lithium gross profit fell by about 209 million yuan quarter on quarter to 1.61 billion yuan.
  • Other income was also a drag: third-quarter investment income from associates and joint ventures fell 600 million yuan quarter on quarter and 623 million yuan year on year. Although profits from tungsten, tin and sulfur rose sharply year on year in the first three quarters, Morgan Stanley judged that price corrections weakened their third-quarter performance sequentially.

Why does Morgan Stanley maintain its Overweight rating?

  • Morgan Stanley believes the earnings miss has not changed its investment thesis. It maintained its Overweight rating and top-pick status for Zijin Mining, with a target price of 60 Hong Kong dollars for its Hong Kong-listed shares. Compared with the 23 October closing price of 29.46 Hong Kong dollars, the target implies upside of about 104%.
  • The target price is based on a discounted cash flow valuation of the A-shares, adjusted using a renminbi-to-Hong Kong-dollar exchange rate of 0.87 and an A/H-share premium of 10%. The model uses a weighted average cost of capital of 7.5% and a steady-state annual revenue growth rate of 3%.
  • The bank lists stronger copper, gold and lithium prices, and production exceeding expectations from project ramp-ups and undeveloped resources, as upside conditions. Corresponding downside constraints are weaker metal prices, project execution below expectations, and production disruptions caused by geopolitics.