China base metals, gold, lithium and EV metals Report Interpretation

Overview

This is Goldman Sachs’ 1H26 earnings review of 19 Chinese base-metals, gold, lithium and EV-metals stocks. The report differentiates among a constructive copper outlook, a cautious aluminium and lithium price outlook, and worsening sulfur-cost pressure for nickel-linked EV-materials businesses.

Core views

The report finds that 1H26 earnings were mostly below expectations for copper, aluminium and gold, and mixed for lithium. Aluminium producers benefited from elevated metal prices and wider margins, while copper miners delivered strong profit growth from higher copper prices but absorbed meaningful cost inflation. Most lithium companies experienced a profit turnaround as lithium prices recovered, but Huayou and GEM disappointed as sulfur prices rose and MHP output fell. For aluminium, Goldman Sachs expects SHFE aluminium prices and spreads to soften as supply expands in China and overseas from 2H26E. It forecasts the SHFE spread declining from Rmb8,542/t in 2026E to Rmb4,250/t in 2027E and Rmb4,000/t in 2028E. Chalco’s 2026E recurring earnings rise 6% on year-to-date pricing, but its 2027-28E estimates fall 12% as the 2027E and 2028E SHFE price assumptions are cut to Rmb18,958/t and Rmb18,896/t. Goldman Sachs expects Chalco’s recurring profit to decline 58% in 2027E and maintains Sell/Sell with targets of HK$6.8 and Rmb7.0. Hongqiao’s 1H26 results were below expectations because of lower realised aluminium pricing, higher costs, higher SG&A and a Rmb1.1bn impairment. Its 2026-28E earnings estimates fall 5%-19%, with 2027E recurring profit expected to decline 48%; the rating remains Neutral with a HK$23.0 target. Copper is the report’s preferred area. Goldman Sachs expects prices to remain high in 2H26E because scrap supply remains tight and US stockpiling continues. Zijin is expected to deliver 58% recurring-profit growth to Rmb80.6bn in 2026E from Rmb50.9bn in 2025A, driven by higher gold and copper prices and 5%-12% output growth. Goldman Sachs maintains Buy/Buy and targets of HK$51.0 and Rmb49.0. CMOC’s 1H26 miss reflected lower DRC copper production, and the analysts cut 2026-27E earnings by 2%-7% for production, sulfur costs and DRC super-tax effects, but raise 2028E earnings 17% on a US$13,700/t copper assumption. They expect 75% 2026E profit growth and retain Buy/Buy with targets of HK$23.5 and Rmb25.0. Jiangxi Copper’s stronger-than-expected copper and minor-metals profits drive 2026-27E estimate increases of 16%-20% and a 58% increase for 2028E; its self-mined concentrate is viewed as a relative advantage when smelting TCRC is depressed. Buy/Buy is maintained with targets of HK$50.0 and Rmb65.0. MMG’s estimates fall 11%-17% for 2026-27E due to costs, yet the firm expects recurring profit to more than double to US$1.86bn in 2026E from US$0.82bn, supported by copper prices and deleveraging; Buy is retained with a HK$12.5 target. Goldman Sachs turns more cautious on Zhaojin after weaker-than-expected 1H26 earnings, lower gold output and higher costs. The company cut 2026E total gold-output guidance 36% to 11.72t from 18.26t after two mine fatalities, tightened safety inspections and operating disruptions. The analysts cut 2026-28E earnings by 52%-54%, expect only gradual production recovery from 2H27E, and expect self-mined output to return to roughly 17-18t only by 2028E. They downgrade the stock to Neutral from Buy and lower the target to HK$21.5 from HK$42.0. For lithium, Goldman Sachs expects prices to correct in 2H26E and decline to US$10.3k-16.0k/t-LCE in 2027-28E as the global market shifts from deficit to a 5%-13% surplus in 2H26E and 2027E. The 2026E China spot lithium-carbonate assumption is raised 21% to US$18.8k/t-LCE, including US$16.6k/t-LCE for 2H26E, which lifts near-term earnings for most producers, but the longer-term price assumptions are unchanged. Ganfeng’s 2026E recurring EPS estimate rises 30%; its H shares are upgraded to Neutral from Sell because the price implies US$13.5k/t-LCE and the risk-reward balance is viewed as more even, while the A shares remain Sell because they imply US$16.6k/t-LCE. Targets are reduced to HK$46.0 and Rmb45.0. Tianqi remains Sell/Sell with targets of HK$33.0 and Rmb32.0 because its implied lithium prices of US$18.1k-24.5k/t-LCE are viewed as expensive despite higher 2026E earnings. Yahua and Yongxing also remain Sell as their valuations imply lithium prices above the analysts’ cautious outlook. For EV metals, Huayou’s results were in line, but nickel profit was weak as MHP shipments fell 9.5% year-on-year to 194.5kt in nickel metal because of partial suspension at Huafei amid sulfur costs and Indonesian ore issues. Goldman Sachs cuts 2026-28E earnings by 2%-8%, but upgrades Huayou to Neutral from Sell: the share-price correction, improved ternary-material shipments and margins, and an implied nickel price of US$16.0k/t make the risk-reward profile more balanced. The target falls to Rmb42.0. GEM is downgraded to Sell from Neutral after a substantial earnings miss. Its MHP nickel shipments fell 37% year-on-year in 1H26, and the analysts cut 2026-29E earnings by 8%-51%. They expect recurring earnings to decline from Rmb543mn in 1H26 to Rmb359mn in 2H26E and Rmb283mn in 1H27E because sulfur costs have not fully flowed through; the target is reduced to Rmb5.0.

Analysis framework

Goldman Sachs compares reported 1H26 earnings, operations and management guidance with its estimates, then updates commodity-price, volume, cost and project assumptions. It translates these changes into earnings revisions, target prices, ratings and valuation comparisons across the covered shares.

Methodology notes

• Industry AnalysisSupply-demand framework

  Commodity supply-demand analysis

  The report links expected aluminium supply additions, tight copper scrap supply, and a future lithium surplus to price and margin forecasts.

• Valuation methodsSOTP (Sum-of-the-Parts) Valuation

  Sum-of-the-parts valuation

  For several lithium and EV-material companies, the report values separate mining, battery-material, recycling, copper or other operations and combines them into a target price.

• Valuation methodsP/E and PEG Valuation

  Forward P/E and mid-cycle earnings valuation

  The report applies near-term forward P/E multiples and long-term mid-cycle P/E multiples, often discounting 2030E values back to 2026E.

Asset mapping & comparison

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

• Zijin Mining (2899.HK/601899.SS)

  Covered copper and gold producer; maintained Buy/Buy

  Strengths

  Expected 58% 2026E recurring-profit growth from higher prices and 5%-12% output growth.

  Weaknesses

  Copper mining costs rose more than 15% year-on-year in 1H26.

  Comparison

  Current valuation is estimated to imply a copper price 42% below spot if 2028E targets are achieved.

• CMOC Group (3993.HK/603993.SS)

  Covered copper and cobalt producer; maintained Buy/Buy

  Strengths

  Expected 75% 2026E recurring-profit growth from copper, cobalt-sales recovery and minor metals.

  Weaknesses

  Lower DRC copper production, sulfur costs and super-tax exposure reduce near-term estimates.

  Comparison

  Current valuation is estimated to imply a copper price 35% below spot if 2028E targets are achieved.

  Risks

  Commodity prices, mine operations, project execution, overseas exposure and trading hedging.

• Jiangxi Copper (0358.HK/600362.SS)

  Covered copper producer; maintained Buy/Buy

  Strengths

  Self-mined concentrate reduces exposure to depressed smelting TCRC; 176% 2026E recurring-profit growth expected.

  Comparison

  H shares trade at 7x 2026E P/E versus a historical 5x-10x range.

  Risks

  Copper demand and prices, mine-expansion delays and ore-grade risk.

• Ganfeng Lithium (1772.HK/002460.SZ)

  Covered lithium producer; H upgraded to Neutral while A remains Sell

  Strengths

  1H26 earnings exceeded expectations and 2026E recurring EPS rises 30%.

  Weaknesses

  Goldman Sachs remains cautious on the lithium-price outlook.

  Comparison

  H shares imply US$13.5k/t-LCE versus A shares implying US$16.6k/t-LCE.

  Risks

  Lithium prices, project execution, raw-material costs, EV policy, overseas exposure and recycling growth.

• Huayou Cobalt (603799.SS)

  Covered EV-materials producer; upgraded to Neutral

  Strengths

  Ternary-material shipments nearly doubled year-on-year and unit gross profit improved.

  Weaknesses

  MHP suspension and high sulfur prices weaken nickel profitability.

  Comparison

  The share price is estimated to imply a nickel price of US$16.0k/t, 4% below spot.

  Risks

  Battery-recycling growth, precursor and cathode margins, project execution, raw-material supply and overseas policy.

• GEM (002340.SZ)

  Covered EV-materials producer; downgraded to Sell

  Strengths

  Potential upside from faster recycling growth, improved precursor margins and Indonesian-project ramp-up.

  Weaknesses

  Nickel costs and lower volumes depress earnings; precursor shipments declined year-on-year with limited margin improvement.

  Comparison

  The Rmb5.0 target implies 23% downside versus the report's 5% upside coverage average.

  Risks

  Sustained sulfur costs, nickel-project execution and weaker battery-material profitability.

Key data

• Covered stocks19Chinese base-metals, gold, lithium and EV-metals stocks reviewed.
• Aluminium spread forecastRmb8,542/t in 2026E; Rmb4,250/t in 2027E; Rmb4,000/t in 2028EExpected correction as new supply rises.
• Lithium carbonate assumptionUS$18.8k/t-LCE for 2026E; US$10.3k-16.0k/t-LCE for 2027-28E2026E assumption is 21% above prior; the later range is unchanged.
• Zijin 2026E recurring profitRmb80.6bnExpected 58% growth from Rmb50.9bn in 2025A.
• Zhaojin 2026E gold-output target11.72t36% below prior guidance of 18.26t.
• GEM recurring earnings forecastRmb543mn in 1H26; Rmb359mn in 2H26E; Rmb283mn in 1H27EReflects sustained sulfur-cost pressure in nickel.

Impact & implications

The report’s stock selection favors copper producers with direct exposure to high copper prices, production growth or self-supplied concentrate. It sees aluminium margins and lithium prices as vulnerable to supply-driven correction, while high sulfur costs and MHP disruptions are the central headwinds for nickel-linked EV-material names.

Risks

• Commodity-price changes, particularly copper, aluminium, gold, lithium, nickel and cobalt prices, can materially alter earnings.
• Mine disruptions, ore-grade changes, project delays and slower ramp-ups can reduce output and raise unit costs.
• High sulfur prices and supply tightness can continue to pressure nickel and MHP profitability.
• Overseas policy, regulatory, currency and geopolitical developments can affect projects in Indonesia, the DRC and other jurisdictions.
• EV adoption, battery chemistry and recycling-growth outcomes can change demand and margins for lithium and EV-material companies.

What to watch

• The pace of aluminium supply additions from China and overseas from 2H26E.
• Copper scrap tightness, US stockpiling, mining cost inflation and DRC production performance.
• The transition of the lithium market from deficit to surplus and spot lithium-carbonate prices in 2H26E.
• Zhaojin mine resumptions, accident-investigation outcomes and Haiyu project timing.
• Sulfur prices, MHP production recovery and Indonesian nickel-project progress for Huayou and GEM.