2Q26 results were in line with expectations, and copper production hit a new quarterly high

Overview

This report is an Morgan Stanley earnings review of CMOC Group Ltd (3993.HK) for 2Q26. The core conclusion is that 2Q26 profit performance was broadly in line with expectations, with the investment thesis impact categorized as "in line with expectations," and the expected EPS path largely unchanged. CMOC’s 1H26 profitability was strong, mainly driven by higher copper prices and volumes, higher tungsten-molybdenum prices, and the consolidation of gold operations at end-January.

Core views

Morgan Stanley maintains an Overweight rating and Attractive sector view on 3993.HK. 1H26 guided net profit is RMB 155亿 to 165亿元, up 79% to 90% year-over-year; 2Q26 implied net profit is RMB 77亿 to 87亿元, close to 1Q26's RMB 78亿元. Copper is the key growth highlight: 1H26 copper output reached 38.8 thousand tonnes, up 9.7% year-over-year, representing 49% of full-year guidance, while 2Q26 copper output was 20 thousand tonnes, up 6% quarter-on-quarter and 9% year-over-year, a new quarterly high.

Analysis framework

The report primarily uses forward guidance decomposition, quarter-over-quarter and year-over-year comparisons, output completion tracking, attribution to price and production drivers, and a DCF valuation framework to evaluate earnings, investment stance, and target price. The Hong Kong target price is based on a DCF model, while the A-share target is derived from H-share valuation and then adjusted for A/H premium and FX.

Methodology notes

• Valuation MethodDCF Model

  Discounted cash flow valuation

  Morgan Stanley uses a DCF model with a 10.7% WACC and assumes a 2% revenue growth rate after the explicit forecast period.

• Cross-market Valuation AdjustmentA/H Premium and FX Adjustment

  Deriving A-share target price

  The report states that the A-share target price is based on the H-share target price plus a 6% A/H premium, then adjusted using an HKD/RMB FX rate of 0.88.

• Research FrameworkMorgan Stanley ModelWare

  Profitability and valuation indicator framework

  The report notes that unless otherwise stated, the relevant indicators are based on Morgan Stanley ModelWare, with some indicators calculated using a consensus approach.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 3993.HK

  Core coverage name, Hong Kong H-share

  Strengths

  Overweight rating; target price of HK$26.30; copper output hit a new quarterly high and 1H26 profit grew strongly year-over-year.

  Weaknesses

  The earnings review conclusion is in line with expectations, and the short-term consensus direction is largely unchanged.

  Comparison

  The report uses Hong Kong listing as the main valuation anchor, with the A-share target price derived from the H-share target via A/H premium and FX adjustment.

  Risks

  Copper output missing company guidance, weakening cobalt prices, and global macro recovery slower than expected leading to weaker-than-expected metal price advances.

• 603993.SS

  Corresponding A-share counterpart of the same company

  Strengths

  Benefits from the same operating assets and copper, tungsten-molybdenum, and gold business drivers.

  Weaknesses

  A-share target price is additionally affected by assumptions on A/H premium and HKD/RMB FX.

  Comparison

  The report states that the A-share target price is obtained by adding a 6% A/H premium to the H-share target price and adjusting using an assumed HKD/RMB rate of 0.88.

  Risks

  In addition to operating and metal price risks, there are risks from A/H valuation premium assumptions and FX assumption changes.

Key data

• 1H26 Guided Net Profit人民币155亿至165亿元Up 79% to 90% year-over-year.
• 2Q26 Implied Net Profit人民币77亿至87亿元The midpoint is in line with Morgan Stanley expectations; 1Q26 was RMB 78亿元.
• 1H26 Guided Recurring Net Profit人民币150亿至160亿元Up 72% to 83% year-over-year; 2Q26 implied is RMB 75亿 to 85亿元.
• 1H26 Copper Output38.8 thousand tonnesUp 9.7% year-over-year, about 49% of 2026 guidance.
• 2Q26 Copper Output200,000 tonnesSet a new quarterly high, up 6% quarter-over-quarter and up 9% year-over-year.
• 3993.HK Target PriceHK$26.30July 10 close was HK$14.95, implying roughly 76% upside.
• 2026e EPS人民币1.46元ModelWare forecast value shown in the report tables.
• 2026e EBITDA人民币650.31亿元ModelWare forecast value shown in the report tables.
• 2026e ModelWare Net Profit人民币316.06亿元ModelWare forecast value shown in the report tables.

Impact & implications

The report’s near-term interpretation of CMOC is constructive but not a major re-rating scenario: 2Q26 profit was in line with expectations and the investment thesis remained unchanged. The new high in copper output and strong first-half profit growth support the cyclical leverage of the company’s core metals business. If copper, gold, cobalt, and tungsten prices, or copper output, were to continue beating expectations, both target price and earnings expectations have upside upside. Conversely, downside pressure could come from output below guidance or weaker cobalt prices and macro demand.

Risks

• Copper output significantly below company guidance.
• Cobalt prices weaken due to weaker industrial demand and weaker domestic EV demand.
• Global macroeconomic recovery slower than expected, leading to less pronounced metal price gains than expected.
• Volatility in metal prices, especially changes in copper, gold, cobalt, and tungsten prices, which would affect earnings and valuation.

What to watch

• Whether subsequent-quarter copper output can stay at elevated levels and complete full-year guidance.
• The price path of copper, gold, cobalt, tungsten, and molybdenum.
• The sustainable contribution to profit after consolidation of the gold business.
• Whether the consensus outlook for 2026 and 2027 EPS is revised upward.
• The impact of A/H valuation premium and HKD/RMB FX on 603993.SS valuation.