CMOC's third-quarter profit misses expectations: higher copper output fails to translate into sales as lower tungsten and gold prices weigh on earnings
Original source：Morgan StanleyFirst published on Unhidea：Original source date：
Key takeaway
Copper production remained on track, but lower sales, higher costs and falling tungsten and gold prices weakened the earnings benefit from increased output. These were the main reasons CMOC's third-quarter results fell short of Morgan Stanley's expectations.
Why did profit miss expectations despite rising 40% year on year?
CMOC reported net profit of 7.87 billion yuan in the third quarter of 2026, up 40% year on year but down 6.3% from the second quarter and below Morgan Stanley's expectations. Net profit for the first three quarters totaled 24 billion yuan, up 68% year on year: strong cumulative growth coincided with a decline in quarterly earnings.
Third-quarter net profit excluding non-recurring items was 7.73 billion yuan, up 33% year on year and down 4.8% quarter on quarter, showing that profit still declined after non-recurring items were excluded. The bank attributed the main drag to lower copper sales, higher copper costs and falling tungsten and gold prices.
Why didn't higher copper production boost profit in the quarter?
Production continued to grow: third-quarter copper output was approximately 209 thousand tonnes, up 4.3% quarter on quarter and 10% year on year. Output for the first three quarters totaled 597 thousand tonnes, up 9.8% year on year and equivalent to approximately 76% of the midpoint of full-year guidance. Morgan Stanley considers production to be on track.
Sales moved in the opposite direction: third-quarter copper sales were approximately 191 thousand tonnes, down 1.5% quarter on quarter and 3.4% year on year. The increase in output during the quarter did not translate into sales growth, and higher copper costs further weakened the support that increased production provided to earnings.
How did changes in tungsten and gold prices and expenses further affect profit?
Higher tungsten sales volumes could not offset lower prices: third-quarter sales rose 10% quarter on quarter, but market prices fell 32%, reducing gross profit by 419 million yuan from the second quarter. In the molybdenum business, sales volumes fell 17% quarter on quarter; a 10% rise in market prices only partly offset the impact, and gross profit fell 33 million yuan quarter on quarter.
Gold also saw higher production alongside pressure on profit: third-quarter output was 60.5 thousand ounces, up 5% quarter on quarter, while sales were broadly flat. Gold prices fell 7% quarter on quarter, reducing gold gross profit by 148 million yuan.
Expenses presented both pressure and a buffer. Third-quarter selling and administrative expenses rose to 1.2 billion yuan, an increase of 108 million yuan quarter on quarter. Finance costs fell 675 million yuan quarter on quarter to 174 million yuan, offsetting part of the operating drag. The effective tax rate was 28.9%, unchanged from the second quarter, so the quarterly decline in profit was not driven by a higher tax rate.
Morgan Stanley remains positive: what conditions underpin its view?
Morgan Stanley viewed the results as a modest miss and left its core investment thesis unchanged. It maintained its Overweight rating and set an H-share price target of HK$21.10, implying approximately 62% upside from the 23 October closing price of HK$13.01.
The price target uses a discounted cash flow model, assuming a weighted average cost of capital of 10.7% and annual revenue growth of 2% beyond the explicit forecast period. Copper output materially below company guidance, weaker cobalt demand causing prices to fall, or other metal prices rising more slowly than the bank expects would all weaken valuation support; stronger copper output and metal prices are upside factors.
