CMOC delivers resilient results despite cost pressures; UBS raises price target to RMB31

Overview

This report reviews CMOC's first-half 2026 results, focusing on the production, costs and sales constraints of copper, cobalt and gold, while assessing the impact of rising sulphur and energy costs. UBS believes the company delivered robust results despite cost headwinds, maintains its "Buy" rating and raises its price target.

Core views

CMOC announced its first-half results on 19 August 2026, with attributable net profit reaching RMB16.2 billion, up 86% YoY and slightly above the midpoint of its previous RMB16.0 billion profit alert. This implies second-quarter attributable net profit of approximately RMB8.4 billion, up 8% QoQ and broadly in line with UBS estimates and market consensus. The company also announced its first interim dividend of RMB0.095 per share, corresponding to a payout ratio of approximately 13%; by comparison, the full-year payout ratio was 30% in 2025. UBS views these results as evidence that the company continues to deliver robust earnings despite a weakening cost environment. By commodity, second-quarter copper production was 200,000 tonnes, up 6% QoQ; first-half copper production was equivalent to approximately 49% of the midpoint of the 2026 full-year production guidance of 760,000 to 820,000 tonnes, broadly on track with the annual target. Supply disruptions caused by geopolitical tensions in the Middle East drove up sulphur and energy prices in the second quarter, placing moderate pressure on copper business costs. At the results briefing on 20 August, management reiterated that securing sulphur supply is the top operational priority. Existing inventories and procurement channels remain sufficient, so although recent price volatility will raise costs, the risk of supply disruption is contained. The company intends to partially offset the impact of higher sulphur prices by improving recovery rates, optimising acid consumption and continuing to advance operational efficiency measures. The cobalt business produced approximately 35,000 tonnes in the second quarter, but sales volumes continued to be constrained by logistics and export quota issues, meaning the increase in production had not yet been fully converted into sales during the period. Gold production was 1.8 tonnes in the second quarter, while unit costs increased moderately by approximately 2% QoQ. Management expects full-year gold unit costs to remain broadly stable and believes MGM's costs could decline in the second half of 2026. UBS therefore does not view the second-quarter cost increase as a clear deterioration in the full-year cost trend. UBS's financial forecasts show revenue of RMB340,501 million, RMB359,477 million, RMB381,067 million, RMB385,482 million and RMB378,792 million, respectively, from 2026 to 2030. EBIT for the same period is forecast at RMB55,531 million, RMB58,052 million, RMB62,182 million, RMB66,441 million and RMB66,094 million, respectively, while attributable net profit is forecast at RMB32,048 million, RMB33,618 million, RMB36,011 million, RMB38,488 million and RMB38,299 million. Corresponding EPS is forecast at RMB1.50, RMB1.57, RMB1.68, RMB1.80 and RMB1.79, with the 2026-2028 forecasts slightly below market consensus of RMB1.53, RMB1.60 and RMB1.75. DPS is expected to increase from RMB0.45 in 2026 to RMB0.54 in both 2029 and 2030. Net cash is expected to rise from RMB1,781 million in 2025 to RMB17,642 million in 2026 and further to RMB138,696 million by 2030. In terms of valuation, CMOC's A-shares currently trade at 12.2x and 11.6x 2026E and 2027E P/E, respectively. UBS rolls its valuation base forward to 2027 and, applying a 20x 2027E P/E, raises its 12-month price target by 3% from RMB30 to RMB31. Based on the share price of RMB18.27 on 20 August 2026, the report indicates forecast share price appreciation of 69.7% and a forecast dividend yield of 2.5%, implying a total forecast stock return of 72.1%. Relative to an assumed market return of 6.8%, the forecast excess return is 65.4%. The short-term quantitative assessment has a different time frame from the 12-month rating: UBS assigns a score of 4 to the industry structure over the next six months, indicating improvement. The regulatory environment, operational or share-price-related trends over the past three to six months, the deviation of the next EPS result from consensus, and the risk skew of the next earnings result relative to UBS forecasts are all scored 3, indicating a broadly neutral outlook. The report also identifies no clear catalyst over the next three months. Overall, UBS's positive view is driven primarily by robust earnings and production delivery, cost-mitigation measures and the higher valuation, rather than reliance on short-term event catalysts.

Analysis framework

UBS first compares actual profit with the midpoint of the profit alert, its own forecasts and market consensus to determine whether results differed from expectations. It then breaks down production, unit costs and sales constraints across copper, cobalt and gold, and uses management commentary to assess sulphur supply and cost-mitigation measures. Finally, the report links earnings forecasts to a 2027 P/E valuation and supplements the analysis with a short-term quantitative questionnaire covering the industry, regulation, earnings risks and catalysts.

Methodology notes

• Event-driven strategies and behavioural financeExpectation gap/expectation management

  Comparison of actual results with the midpoint of the profit alert, UBS forecasts and market consensus

  The report compares first-half and second-quarter profits against different expectation benchmarks to assess whether results exceeded expectations. The first-half result was slightly above the midpoint of the profit alert, while the second-quarter result was broadly in line with UBS and market expectations.

• Industry/sector analysis framework

  Tracking production, unit costs and sales constraints by commodity

  The report separately examines the production, costs and sales of copper, cobalt and gold to identify the contributions and constraints of the different metals businesses to operating performance.

• Valuation methodologyPE/PEG valuation

  Target P/E valuation

  UBS rolls the valuation year forward to 2027 and applies a 20x 2027E P/E to derive a 12-month price target of RMB31.

• Quantitative/factor/portfolio theory

  Quantitative Research Review short-term factor scores

  UBS uses a 1-to-5 questionnaire to assess the industry and regulatory environment over the next six months, recent changes and the direction of risks surrounding the next earnings update. This short-term framework is independent of the 12-month stock rating.

• Quantitative/factor/portfolio theory

  Forecast stock return and assumed market return

  The forecast stock return comprises expected share price appreciation over the next 12 months and the total dividend yield, which is then compared with the assumed market return to calculate the forecast excess return.

Asset mapping & comparison

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

• CMOC A-shares (603993.SS)

  The report believes the company continues to deliver robust production and earnings despite cost headwinds and assigns a 12-month "Buy" rating.

  Strengths

  Copper production increased QoQ and first-half earnings rose substantially YoY; sulphur inventories and procurement channels are sufficient, while the company has cost-mitigation levers involving recovery rates, acid consumption and efficiency.

  Weaknesses

  Cobalt sales are constrained by logistics and export quotas, while higher sulphur and energy prices are placing pressure on copper business costs.

  Comparison

  First-half profit was slightly above the midpoint of the profit alert, while second-quarter profit was broadly in line with UBS and market consensus expectations. UBS's 2026-2028 EPS forecasts are slightly below market consensus for the corresponding periods.

  Risks

  Risks related to overseas politics, copper and cobalt prices, mine ramp-ups, exchange rates, regulatory changes, production disruptions and fluctuations in downstream demand.

Key data

• First-half 2026 attributable net profitRMB16.2 billionUp 86% YoY and slightly above the RMB16.0 billion midpoint of the profit alert
• Second-quarter 2026 attributable net profitRMB8.4 billionUp 8% QoQ and broadly in line with UBS and market consensus expectations
• First interim dividendRMB0.095 per sharePayout ratio of approximately 13%, versus a full-year payout ratio of 30% in 2025
• Second-quarter copper production200,000 tonnesUp 6% QoQ; first-half production reached approximately 49% of the midpoint of full-year guidance
• 2026 copper production guidance760,000 to 820,000 tonnesManagement did not indicate any change to guidance
• Second-quarter cobalt productionApproximately 35,000 tonnesSales volumes were constrained by logistics and export quota issues
• Second-quarter gold production and costs1.8 tonnes; unit cost up approximately 2% QoQManagement expects full-year unit costs to remain broadly stable, while MGM costs could decline in the second half
• 2026E to 2030E revenueRMB340,501/359,477/381,067/385,482/378,792 millionUBS forecasts
• 2026E to 2030E attributable net profitRMB32,048/33,618/36,011/38,488/38,299 millionUBS forecasts
• 2026E to 2030E EPSRMB1.50/1.57/1.68/1.80/1.79Market consensus for 2026E to 2028E is RMB1.53/1.60/1.75, respectively
• 2026E to 2030E DPSRMB0.45/0.47/0.51/0.54/0.54UBS forecasts
• 2026E to 2030E net cashRMB17,642/43,302/71,713/105,112/138,696 millionNet cash was RMB1,781 million in 2025
• Current forecast P/E2026E 12.2x; 2027E 11.6xCMOC A-shares
• Price target valuation basis20x 2027E P/EPrice target raised by 3% from RMB30 to RMB31
• Forecast stock return72.1%Comprising forecast share price appreciation of 69.7% and a forecast dividend yield of 2.5%
• Forecast excess return65.4%Relative to an assumed market return of 6.8%

Impact & implications

UBS believes CMOC's production progress and earnings delivery demonstrate its ability to withstand temporary sulphur and energy cost pressures. Inventories, procurement channels, improved recovery rates, optimised acid consumption and operational efficiency measures should contain the cost impact, although cobalt sales remain dependent on the easing of logistics and export quota constraints. After rolling its valuation forward to 2027, UBS raises its price target to RMB31, with its positive view based primarily on operational delivery and medium-term earnings capacity.

Risks

• Fluctuations in commodity prices, including copper and cobalt, could affect the company's revenue and earnings.
• Regulatory changes or production disruptions could affect China's copper and cobalt industry and CMOC's operations.
• Overseas political risks could affect the company's global mining assets and supply chains.
• A faster- or slower-than-expected ramp-up of new mine capacity could alter production and earnings performance.
• Exchange-rate fluctuations could affect the costs and financial results of the company's overseas operations.
• Changes in demand from industries such as property and construction, power grids and equipment, home appliances, machinery and transportation could affect copper demand.
• Demand for portable electronics and a faster- or slower-than-expected decline in cobalt usage in ternary batteries could affect cobalt demand.
• Higher sulphur and energy prices could continue to increase costs, while cobalt sales also face logistics and export quota constraints.

What to watch

• Monitor sulphur inventories, procurement channels and price changes, as well as their actual impact on copper business costs.
• Track copper production progress against the 2026 full-year guidance of 760,000 to 820,000 tonnes.
• Monitor whether improvements in recovery rates, optimised acid consumption and operational efficiency measures can offset cost pressures as planned.
• Track whether cobalt logistics and export quota issues ease and how effectively production is converted into sales volumes.
• Monitor whether full-year gold unit costs remain stable and whether MGM costs decline in the second half of 2026.