Zijin Mining's 2Q26 Net Profit Rose 45.4% YoY, with Results in Line and the Core Thesis Largely Unchanged

Overview

The report evaluates Zijin Mining's first-half and second-quarter 2026 results and breaks down growth and cost changes across its gold, copper, lithium, other metals, and renewable energy businesses. Morgan Stanley believes the overall results were in line with expectations, the direction of consensus EPS estimates for the next 12 months remains unchanged, and the original investment thesis has been largely unaffected.

Core views

In terms of earnings, Zijin Mining's 1H26 net profit was RMB39.2 billion, in line with preliminary results; 2Q26 net profit was RMB19.1 billion, down 4.4% QoQ and up 45.4% YoY. Excluding non-recurring items, recurring net profit was RMB38.0 billion in 1H26 and RMB19.6 billion in 2Q26, up 6.1% QoQ and 66.7% YoY. Morgan Stanley therefore assesses the financial results as being in line with market expectations and believes that the direction of consensus EPS estimates for the next 12 months and the original investment thesis remain largely unchanged. Gold remains the core source of profit. Gold production in 1H26 rose 13.4% YoY to 46.7 tonnes, with the increase mainly coming from ZGI; 2Q26 production was 23.2 tonnes, down 1% QoQ and up 5% YoY. Gold contributed 41.7% of gross profit in 1H26, demonstrating its dominant role in overall earnings. However, gold production costs rose 11% QoQ and 13% YoY in 2Q26, meaning production growth was accompanied by higher costs. Production and cost pressures were more pronounced in the copper business. Copper production was 534 kt in 1H26; excluding KK production, copper output rose 5% YoY. Copper production was 275 kt in 2Q26, up 6% QoQ and down 1% YoY, while the copper business contributed 33.8% of 1H26 gross profit. The reduction in KK's FY26 production guidance is expected to lower Zijin Mining's attributable copper production by 22—57 kt and pressure the company's FY26 copper production target of 1.2 Mt. Meanwhile, copper production costs rose 4% QoQ and 15% YoY in 2Q26; the company attributed this to lower processed ore grades, higher raw material prices, longer transportation distances, increased royalties, and the separate classification of by-products. The lithium business began ramping up following the commencement of production at Manono. Lithium production was 43.6 kt LCE in 1H26, of which 27.4 kt was produced in 2Q26; the lithium business contributed 3.4% of 1H26 gross profit. Production of other minor metals also increased: tungsten output was 2.6 kt, up 20% YoY, while molybdenum output was 6.3 kt, up 7% YoY. After internal eliminations, other products, including molybdenum, tungsten, iron, cobalt, and sulfur, accounted for 19% of 1H26 revenue and 15.5% of gross profit, providing diversified contributions beyond gold and copper. The renewable energy business continued to expand rapidly, with installed capacity rising 27.6% YoY to 1.15GW and power generation increasing 31.2% to 635.8GWh. Although its profit contribution was not separately disclosed in the report, these figures indicate that the company's supporting energy capabilities continue to improve. Morgan Stanley's model forecasts earnings per share of RMB1.89, RMB2.86, RMB3.25, and RMB3.41 for 2025 through 2028, respectively; net revenue of RMB341.0 billion, RMB479.0 billion, RMB511.0 billion, and RMB516.0 billion; and net profit of RMB51.8 billion, RMB76.0 billion, RMB86.3 billion, and RMB90.5 billion. Over the same period, P/E ratios are 16.4x, 11.5x, 10.2x, and 9.7x; P/B ratios are 4.6x, 3.5x, 2.8x, and 2.3x; and EV/EBITDA ratios are 11.1x, 7.5x, 6.1x, and 5.6x. ROE is 37.0%, 41.0%, 34.7%, and 28.7%, respectively, while dividend yields are 1.5%, 2.2%, 3.4%, and 3.6%. The valuation uses a base-case DCF model, with core assumptions of a 7.5% WACC, a beta of 1.4, and a steady-state annual revenue growth rate of 3%. The H-share price target is based on the A-share price target and then adjusted using an RMB/HKD exchange rate of 0.87 and a 10% A/H-share premium, resulting in a price target of HK$61.00. Compared with the closing price of HK$38.56 on August 21, 2026, this implies 58% upside; Morgan Stanley maintains its Overweight rating and Attractive industry view.

Analysis framework

The report first compares net profit and recurring net profit with preliminary results and market expectations, then breaks down production, costs, and gross profit contributions across gold, copper, lithium, other metals, and renewable energy. It subsequently assesses the impact of KK's production reduction on FY26 copper production guidance and reviews changes in earnings and valuation using Morgan Stanley ModelWare financial forecasts. Finally, it uses the A-share DCF result as the basis for deriving the H-share price target through exchange-rate and A/H-share premium adjustments.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  A-share DCF Valuation and A/H-share Price Target Conversion

  The report calculates the A-share base-case value using a 7.5% WACC, a beta of 1.4, and a steady-state annual revenue growth rate of 3%, then converts it into the H-share price target using an RMB/HKD exchange rate of 0.87 and a 10% A/H-share premium.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Breakdown of Production, Costs, and Gross Profit Contribution by Product

  The report separately analyzes changes in production, production costs, and gross profit shares for gold, copper, lithium, and other metals to explain the sources of profit growth and the pressures facing the copper business.

• Corporate Fundamentals and Financial Framework

  Morgan Stanley ModelWare Forecasting Framework

  Unless otherwise indicated, the EPS, revenue, net profit, valuation multiples, ROE, and dividend yields in the report are based on the Morgan Stanley ModelWare framework; figures marked with an “e” represent Morgan Stanley Research estimates.

Asset mapping & comparison

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

• Zijin Mining (2899.HK)

  The primary security covered by the report, with a price target of HK$61.00, implying 58% upside from the current price of HK$38.56.

  Strengths

  Rising gold production, strong recurring profit, and expanding lithium, minor metals, and renewable energy businesses.

  Weaknesses

  KK's production reduction lowers attributable copper production, while gold and copper production costs both increased YoY.

  Comparison

  The H-share price target is derived from the A-share DCF value using an RMB/HKD exchange rate of 0.87 and a 10% A/H-share premium.

  Risks

  Weaker commodity prices, project execution falling short of expectations, and geopolitical disruptions to production.

• Zijin Mining (601899.SS)

  The A-share DCF valuation forms the basis for deriving the H-share price target; the report lists an August 21, 2026 share price of RMB34.74 and the latest recorded price target of RMB58.

  Strengths

  Benefits from the group's production growth and diversified earnings across gold, copper, lithium, and other resources businesses.

  Weaknesses

  Copper production guidance is under pressure, while production costs are affected by ore grades, raw materials, transportation, royalties, and other factors.

  Comparison

  The A-share value is adjusted for the exchange rate and A/H-share premium to determine the H-share price target.

  Risks

  Weaker commodity prices, project ramp-up or execution falling short of expectations, and production disruptions caused by geopolitical developments.

Key data

• 1H26 Net ProfitRMB39.2 billionIn line with preliminary results
• 2Q26 Net ProfitRMB19.1 billionDown 4.4% QoQ and up 45.4% YoY
• 2Q26 Recurring Net ProfitRMB19.6 billionUp 6.1% QoQ and 66.7% YoY
• 1H26 Gold Production46.7 tonnesUp 13.4% YoY, with the increase mainly coming from ZGI
• 2Q26 Gold Production and Costs23.2 tonnes; production costs up 11% QoQ and 13% YoYProduction down 1% QoQ and up 5% YoY
• 1H26 Gold Gross Profit Contribution41.7%Largest source of gross profit
• 1H26 Copper Production534 ktUp 5% YoY excluding KK production
• 2Q26 Copper Production and Costs275 kt; production costs up 4% QoQ and 15% YoYProduction up 6% QoQ and down 1% YoY
• Impact of KK Production AdjustmentAttributable copper production reduced by 22—57 ktPressuring FY26 copper production guidance of 1.2 Mt
• 1H26 Lithium Production43.6 kt LCE27.4 kt in 2Q26, benefiting from the commencement of production at Manono
• Minor Metal ProductionTungsten 2.6 kt; molybdenum 6.3 ktUp 20% and 7% YoY, respectively
• Renewable Energy Installed Capacity and Power Generation1.15GW; 635.8GWhUp 27.6% and 31.2% YoY, respectively
• 2026 Forecast EPS and Net ProfitRMB2.86; RMB76.0 billionMorgan Stanley ModelWare forecast
• H-share Price TargetHK$61.00Implies 58% upside from the current price of HK$38.56

Impact & implications

The report believes that the current results do not alter the original investment thesis: higher gold production and its substantial gross profit contribution continue to support earnings, while lithium, other metals, and renewable energy provide supplementary contributions; however, KK's production reduction and rising gold and copper costs constrain further operational improvement. Based on existing earnings forecasts and DCF valuation, Morgan Stanley maintains its Overweight rating and HK$61.00 H-share price target.

Risks

• Copper, gold, and lithium prices below assumptions could reduce earnings and valuation.
• Project execution or capacity ramp-up falling short of expectations could result in production below plan.
• Geopolitical risks could cause production disruptions.

What to watch

• Monitor changes in copper, gold, and lithium prices; stronger prices represent an upside scenario, while weaker prices represent a downside scenario.
• Monitor where KK's production reduction ultimately falls within the estimated 22—57 kt decrease in Zijin Mining's attributable copper production.
• Monitor whether the company can achieve its FY26 copper production guidance of 1.2 Mt.
• Monitor gold and copper production costs, as well as changes in ore grades, raw material prices, transportation distances, and royalties.
• Monitor whether the ramp-up of Manono and other projects can deliver additional production.