Zijin Mining's First-Half Results Were In Line, with Strong Cash Flow and Profit Growth Supporting the Reiterated Buy Rating

Overview

The report reviews Zijin Mining's 1H26 results and explains the rationale for reiterating Buy ratings on its A-shares and H-shares from the perspectives of segment profitability, costs, cash flow, growth forecasts, and valuation. First-half profit was broadly in line with expectations, with stronger performance from the copper business. The gold and lithium businesses fell short of Goldman Sachs' expectations, but free cash flow and the balance sheet improved significantly.

Core views

Zijin Mining reported 1H26 net profit of Rmb39.2bn and EPS of Rmb1.47, both up 68% yoy and consistent with its previous earnings guidance. Excluding one-off items such as fair-value gains and foreign-exchange losses, recurring net profit was Rmb38.8bn, up 77% yoy and broadly in line with Goldman Sachs' forecast and Bloomberg consensus. The company declared an interim cash dividend of Rmb0.42 per share, representing a 28% payout ratio, up from 25% in 1H25. Overall gross profit was 5% below Goldman Sachs' expectation, but lower selling and administrative expenses and income tax expenses offset the gross-profit shortfall, leaving final profit broadly in line with expectations. Operationally, the company's mined gold output increased 13% yoy in 1H26; excluding Kamoa, mined copper output increased 5% yoy. However, weaker-than-expected profits from the gold and lithium businesses more than offset the positive contribution from the copper business's outperformance. Goldman Sachs estimates that unit selling costs for gold and copper increased approximately 11% and 13% yoy, respectively, due to factors including declining ore grades, longer haulage distances as mining advanced, higher royalties resulting from commodity-price increases, and, as stated in the report, higher diesel and reagent costs following the conflict in the Middle East. The copper business contributed 39% of total gross profit. Gross profit from mined copper increased 58% yoy and was 7% above Goldman Sachs' forecast, primarily driven by higher realized prices and lower-than-expected costs. The average realized copper price rose 36% yoy, below the 39% increase in the benchmark copper price, but the realized prices of both copper concentrate and copper cathode exceeded Goldman Sachs' forecasts. Including Kamoa's attributable production, mined copper output declined 6% yoy because growth at Julong and Kolwezi did not fully offset Kamoa's production decline, although this production performance was in line with expectations. Unit selling cost for copper increased 13% yoy, which the company attributed to declining ore grades, higher diesel and reagent costs, and increased royalties resulting from higher commodity prices. The gold business contributed 47% of total gross profit. Gross profit from mined gold increased 92% yoy but was 7% below Goldman Sachs' expectation, primarily due to lower realized prices and higher-than-expected unit costs. The average realized gold price increased 45% yoy, below the 53% increase in the benchmark gold price. Mined gold output increased 13% yoy but remained 7% below Goldman Sachs' forecast, primarily due to lower production at overseas gold mines. Unit selling cost for gold increased 11% yoy and was 3% above Goldman Sachs' expectation. The lithium business contributed 4% of total gross profit. Gross profit from the lithium business increased to 26 times the prior-year level but was 26% below Goldman Sachs' expectation due to lower realized prices. Goldman Sachs estimates that the average realized lithium carbonate equivalent price increased 129% yoy, below the 144% rise in China's lithium carbonate spot price, possibly because some products were sold in the form of lithium ore. Total lithium carbonate equivalent output increased to six times the prior-year level and was broadly in line with expectations. Unit selling cost increased 21% yoy but was 20% below Goldman Sachs' forecast. Expenses and taxes also supported profit. Selling and administrative expenses increased 33% yoy but were below expectations, which Goldman Sachs believes may reflect better cost control. Finance expenses declined 45% yoy but remained above its forecast. Income tax expense was 18% below forecast. Goldman Sachs estimates that the effective tax rate in 1H26 was 22%, up 5% yoy but below expectations. Cash flow was the standout area of improvement in these results. Operating cash flow increased 92% yoy, outpacing profit growth. Investing cash outflow declined 37% yoy, which the report attributed to lower capital expenditure. Free cash flow improved from -Rmb0.3bn in 1H25 to Rmb37.2bn in 1H26. Driven by the improvement in free cash flow, the net gearing ratio declined from 53% at the end of 2025 to 36% at the end of June 2026, indicating that profit growth is translating into stronger cash generation and deleveraging. Goldman Sachs raised its 2026 earnings forecast for Zijin Mining by 2% to reflect year-to-date mark-to-market changes in commodity prices. It also raised its 2028 earnings forecast by 32%, primarily because it increased its long-term copper price assumption from US$10,000/t to US$13,700/t, aligning it with the forecast of its global commodities team. Goldman Sachs expects 2026 recurring profit to increase from Rmb50.9bn in 2025 to Rmb80.6bn, up 58% yoy, driven by higher gold and copper prices and 5%-12% yoy growth in gold and copper output. As a basis for growth, Zijin Mining's 2025 copper output was 1,085kt and gold output was 89.5t. Copper's principal end markets include power grids, home appliances, machinery, and electric vehicles. The model forecasts EPS of Rmb3.05, Rmb3.41, and Rmb3.65 for 2026E, 2027E, and 2028E, respectively, corresponding to P/E ratios of 10.9x, 9.7x, and 9.0x. Free cash flow yields are forecast at 9.7%, 9.7%, and 10.9%, respectively. Over the same period, net debt/equity is forecast to decline from 9.6% in 2026E to -5.9% in 2027E and -18.4% in 2028E, extending the thesis of improving cash flow and a strengthening balance sheet. The valuation methodology remains unchanged and continues to price the shares based on the historical relationship between P/B and ROE. The H-shares/A-shares are valued at 2026E P/B multiples of 4.7x/5.2x, respectively, versus the previous 4.8x for the H-shares and an unchanged 5.2x for the A-shares. The corresponding ROE assumption was raised from 36.4% to 37.0%. This valuation also corresponds to H-share/A-share P/E ratios of 14x/15.5x based on EPS implied by the long-term copper price, ranging from the midpoint to the high end of global peers' 12-16x mid-cycle valuation range. Goldman Sachs estimates that, assuming the company achieves its 2028 targets, the current H-share price implies a copper price of only US$9,090/t, 36% below the spot level of US$14,113/t, and therefore considers the valuation attractive. The report reiterates Buy ratings on the A-shares and H-shares and leaves its 12-month target prices of HK$51.0/Rmb49.0 unchanged.

Analysis framework

Goldman Sachs first compares 1H26 net profit and recurring profit with the previous earnings guidance, its own forecasts, and market consensus. It then breaks down production, realized prices, unit costs, and gross-profit variances across the copper, gold, and lithium businesses. Next, it analyzes expenses, tax rates, operating cash flow, capital expenditure, and leverage changes to assess the conversion of profit into free cash flow. For its forecasts, it adjusts the earnings model based on commodity-price mark-to-market changes and the copper price assumptions of its global commodities team. Finally, it derives its valuation from the historical relationship between P/B and ROE and cross-checks the result using P/E based on earnings implied by the long-term copper price, the global peer range, and the copper price implied by the share price.

Methodology notes

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Segment-level volume, price, and cost decomposition

  The report separately examines the production, realized prices, unit selling costs, and gross profit of the copper, gold, and lithium businesses to explain each segment's year-on-year growth and variance from forecasts.

• Corporate Fundamentals and Financial FrameworkFree cash flow analysis

  Free cash flow analysis based on operating cash flow less capital expenditure

  The report uses growth in operating cash flow and changes in investing cash flow and capital expenditure to explain the shift in free cash flow from negative to positive, and further links this improvement to the decline in the net gearing ratio.

• Valuation MethodPB valuation

  Valuation based on the historical correlation between P/B and ROE

  Based on the historical relationship between Zijin Mining's P/B and ROE, Goldman Sachs applies 2026E P/B multiples of 4.7x and 5.2x to the H-shares and A-shares, respectively, and supports the target prices with a 37.0% ROE.

• Valuation MethodPE/PEG valuation

  P/E cross-check based on EPS implied by the long-term copper price

  The report translates the target prices into H-share/A-share P/E ratios of 14x/15.5x and compares them with global peers' 12-16x mid-cycle valuation range to cross-check the valuation results.

Asset mapping & comparison

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

• Zijin Mining H-shares (2899.HK)

  The report believes the shares benefit from growth in gold and copper prices and production, improving free cash flow, and deleveraging, and reiterates a Buy rating.

  Strengths

  1H26 profit was in line with expectations, while free cash flow turned positive to Rmb37.2bn; the current share price implies a copper price of US$9,090/t, 36% below the spot level.

  Weaknesses

  Gross profit from the gold and lithium businesses was below expectations, while unit costs for gold and copper increased yoy.

  Comparison

  The target valuation corresponds to a 14x P/E based on EPS implied by the long-term copper price, at the midpoint of global peers' 12-16x mid-cycle range.

  Risks

  Gold and copper price volatility, slow project progress, and foreign-exchange and country risks associated with overseas assets.

• Zijin Mining A-shares (601899.SS)

  The report believes the shares similarly benefit from growth in gold and copper prices and production, improving cash flow, and earnings delivery, and reiterates a Buy rating.

  Strengths

  Recurring profit is forecast to increase 58% yoy in 2026, while the balance sheet strengthens as free cash flow improves.

  Weaknesses

  Realized prices in some businesses lagged benchmark-price increases, unit costs rose, and overseas gold-mine production was below expectations.

  Comparison

  The target valuation corresponds to a 15.5x P/E based on EPS implied by the long-term copper price, at the high end of global peers' 12-16x mid-cycle range.

  Risks

  Gold and copper price volatility, project execution and schedule risks, and foreign-exchange and country risks associated with overseas assets.

Key data

• 1H26 Net ProfitRmb39.2bnUp 68% yoy and in line with the previous earnings guidance
• 1H26 Earnings per ShareRmb1.47/shUp 68% yoy
• 1H26 Recurring Net ProfitRmb38.8bnUp 77% yoy and broadly in line with Goldman Sachs' forecast and Bloomberg consensus
• 1H26 Interim DividendRmb0.42/sh28% payout ratio, versus 25% in 1H25
• 1H26 Free Cash FlowRmb37.2bn-Rmb0.3bn in 1H25
• Net Gearing Ratio at End-June 202636%53% at the end of 2025
• Copper Business Share of Gross Profit39%Gross profit from mined copper increased 58% yoy and was 7% above Goldman Sachs' expectation
• Gold Business Share of Gross Profit47%Gross profit from mined gold increased 92% yoy but was 7% below Goldman Sachs' expectation
• Lithium Business Share of Gross Profit4%Gross profit from the lithium business increased to 26 times the prior-year level but was 26% below Goldman Sachs' expectation
• 2026E Recurring ProfitRmb80.6bnUp 58% from Rmb50.9bn in 2025
• 2028E Copper Price AssumptionUS$13,700/tPreviously US$10,000/t
• Copper Price Implied by H-sharesUS$9,090/tAssuming the 2028E targets are achieved, 36% below the spot level of US$14,113/t
• 2026E H-share/A-share P/B4.7x/5.2xCorresponding to ROE of 37.0%; previously 4.8x/5.2x and ROE of 36.4%
• H-share/A-share Target Valuation P/E14x/15.5xGlobal peers' mid-cycle valuation range is 12-16x
• 2026E-2028E EPSRmb3.05/Rmb3.41/Rmb3.65Corresponding to P/E of 10.9x/9.7x/9.0x
• 12-Month Target PriceHK$51.0/Rmb49.0H-share/A-share target prices remain unchanged

Impact & implications

The report believes that first-half profit meeting expectations, the substantial improvement in free cash flow, and the decline in the net gearing ratio demonstrate that commodity-price and production growth are translating more effectively into cash generation and balance-sheet improvement. Despite pressures in the gold and lithium businesses and on unit costs, the copper business's outperformance, expense control, and lower taxes provided offsets. Given forecast recurring profit growth of 58% in 2026, the increased 2028 copper price assumption, and a copper price implied by the current share price that is below the spot level, Goldman Sachs considers the valuations of both the A-shares and H-shares attractive.

Risks

• Each US$100/oz change in the gold price changes 2026E earnings by 1.5%; each US$0.10/lb change in the copper price changes 2026E earnings by 1.1%.
• Project execution falling short of expectations or slow project progress could weaken the company's ability to sustain growth.
• Overseas assets face foreign-exchange and country risks.