First-half results in line with guidance; maintain Overweight view

Overview

JPMorgan initiates coverage of Zijin Gold International with an Overweight rating and a December 2027 target price of HK$146.00. The company's 1H26 results were consistent with prior guidance, with improvements in earnings, gross margin, operating cash flow, and payout ratio. The research believes the company has built a growth platform through acquisitions and reserve expansion, benefiting from a favorable gold-price outlook and continued capacity expansion.

Core views

1H26 net profit was US$1.45bn, up 179% year on year and 34% sequentially, representing approximately 50% of JPMorgan's FY2026 forecast and 44% of market consensus. Mined-gold sales rose 32% year on year to 26.1 tonnes, while realized gold prices increased 51% year on year, driving gross margin to 58.4%. The company plans to achieve gold production of 70-75 tonnes by 2028; JPMorgan forecasts a 33% earnings CAGR from 2025 to 2028. However, the 1% sequential decline in sales volume, ore-grade fluctuations and abnormal rainfall, as well as higher costs caused by royalties, require continued monitoring.

Analysis framework

Combines interim results with prior earnings guidance, changes in sales volume and unit costs, cash flow and leverage levels, capacity-expansion plans, and DCF valuation to determine the target price.

Methodology notes

• Valuation methodsDiscounted cash flow method

  DCF valuation

  A December 2027 target price of HK$146.00 is derived using an 8.5% weighted average cost of capital and a 2.5% terminal growth rate.

• Earnings qualityEarnings and operating metrics analysis

  Sales volume, gold prices, costs, and gross margin

  Assesses earnings drivers and sustainability through mined-gold sales volume, realized gold prices, unit costs, gross margin, and operating cash flow.

Asset mapping & comparison

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

• 2259.HK

  Core covered security

  Strengths

  Growth in gold sales, benefit from higher gold prices, record gross margin, stronger operating cash flow, ample cash, and a clear capacity-expansion path.

  Weaknesses

  Slight sequential decline in sales volume, higher unit costs affected by royalties, and earnings sensitivity to gold prices.

  Comparison

  The 1H26 payout ratio was approximately 35%, above 32% in FY25; gross margin was 58.4%, above 56.4% in 2H25 and 46.5% in 1H25.

  Risks

  Gold-price volatility, operational risks across multiple overseas jurisdictions, project-construction delays, illegal mining activity at the Buriticá mine in Colombia, and realized mineral-product prices below expectations.

Key data

• 1H26 net profitUS$1.45bnUp 179% year on year and 34% sequentially, in line with prior earnings guidance of approximately US$1.4bn.
• 1H26 gross margin58.4%A record high, versus 46.5% in 1H25 and 56.4% in 2H25.
• Mined-gold sales volume26.1 tonnesUp 32% year on year and down 1% sequentially.
• Realized gold priceUS$4,643/ozUp 15% sequentially.
• 1H26 AISCUS$1,678/ozUp from US$1,638/oz in 1Q26; further royalty guidance remains to be clarified.
• Interim dividendHK$1.50/shareEquivalent to an approximately 35% payout ratio, above 32% in FY25.
• Operating cash flowUS$1,798mnUS$417mn in 1H25.
• Cash and equivalentsUS$3.9bnAbove US$3.6bn in 2H25 and US$0.4bn in 1H25.
• 2028 gold-production target70-75 tonnesThe company is expanding capacity at key mines.

Impact & implications

Earnings delivery, record gross margins, a higher dividend, and low leverage support the positive investment thesis. Market consensus may see modest-to-downward revisions because first-half net profit represented only approximately 44% of Bloomberg consensus full-year forecasts; however, JPMorgan believes the gold-price outlook and growth-project portfolio continue to support medium- to long-term valuation.

Risks

• Gold-price volatility.
• Risks from operations across multiple overseas jurisdictions and project-construction delays.
• Illegal mining activity at the Buriticá gold mine in Colombia.
• Effects of ore-grade fluctuations and abnormal rainfall on production and sales volume.
• Higher unit costs caused by rising royalties.
• Realized mineral-product prices below expectations.

What to watch

• Further management guidance on 2Q26 unit costs and royalties.
• The impact of ore grades and weather factors on subsequent production and sales volumes.
• Progress of capacity expansion at key mines and execution against the 2028 production target of 70-75 tonnes.
• Changes in gold prices and the company's realized gold prices.
• The direction of revisions to market consensus for 2026 earnings.