Huayou Cobalt's 2025 net profit rose 47% year over year, with higher volumes and metal prices driving profit improvement

Overview

This report is Morgan Stanley's company research on Zhejiang Huayou Cobalt Co., Ltd., focusing on full-year 2025 results, volume and gross profit changes across major metals and battery materials businesses, and the DCF valuation method plus upside/downside risks. The company's 2025 net profit rose 47% year over year to RMB 6.1 billion, and 4Q25 net profit was RMB 1.9 billion, above RMB 1.5 billion in 3Q25 and RMB 1.1 billion in 4Q24.

Core views

The report's core view is that Huayou Cobalt benefited in 2025 from higher volumes and rising metal prices, especially in nickel and intermediates, cobalt, lithium, and cathode materials. The nickel business was supported by ramp-ups at the Huayue and Huafei projects, with MHP shipments up 30% year over year; the cobalt business had essentially flat volumes, but gross profit was significantly boosted by higher cobalt prices; the lithium business benefited from higher volumes and improved lithium prices in 2H25. On the negative side, the copper business saw lower sales and gross profit due to depletion of self-owned ore, and precursor gross profit also declined year over year.

Analysis framework

The report breaks down volume, gross profit, and price drivers by business segment, combining project ramp-up progress, raw material costs, ore sourcing structure, and metal price changes to assess earnings elasticity; on valuation it uses a DCF model and discloses WACC, beta, and steady-state revenue growth assumptions.

Methodology notes

• Valuation methodDCF

  Discounted cash flow valuation

  The report says the target price comes from a DCF model, assuming a WACC of 10.9%, beta of 1.3, and a steady-state revenue growth rate of 2%, while factoring in that ternary lithium battery penetration may progress more slowly than the market expects amid broader LFP adoption.

• Research frameworkMorgan Stanley ModelWare

  Morgan Stanley internal model framework

  The report table notes that, unless otherwise specified, all metrics are based on the Morgan Stanley ModelWare framework; some metrics may be based on consensus methodology or Morgan Stanley Research estimates.

Asset mapping & comparison

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

• Zhejiang Huayou Cobalt Co., Ltd. 603799.SS

  research target

  Strengths

  The nickel and intermediates, cobalt, lithium, and cathode materials businesses contributed significant growth in 2025, with project ramp-ups and rising metal prices driving earnings leverage.

  Weaknesses

  The copper business declined due to depletion of self-owned ore, precursor gross profit fell year over year, and some businesses face pressure from rising raw material costs.

  Comparison

  The report places the company's performance within the Greater China Materials coverage universe and Morgan Stanley's relative rating framework, but no peer quantitative comparison is provided in the input text.

  Risks

  Cobalt and copper prices below expectations, precursor demand weaker than expected, slower-than-expected ramp-up of Indonesian nickel projects, rising sulfur and nickel ore costs, and Zimbabwe export suspensions affecting lithium shipments.

Key data

• Full-year 2025 net profitRMB 6.1 billion, up 47% year over yearWithin the RMB 5.85 billion to RMB 6.45 billion guidance range.
• 4Q25 net profitRMB 1.9 billionCompared with RMB 1.5 billion in 3Q25 and RMB 1.1 billion in 4Q24.
• 2025 nickel product sales293 kt, up 59% year over yearMHP shipments were 236.5 kt of nickel, up 30% year over year, driven by ramp-ups at the Huayue and Huafei projects.
• Gross profit from nickel and intermediatesRMB 7.4 billion, up 36% year over yearAbout 53.8% of total gross profit, supported by higher volumes and rising cobalt by-product prices.
• Cobalt product sales and gross profitSales of 46.5 kt, down 0.6% year over year; gross profit up 252% year over yearGross profit accounted for about 13.5% of total gross profit, mainly driven by higher cobalt prices.
• Copper product sales and gross profitSales of 65.3 kt, down 28% year over year; gross profit of RMB 1.2 billion, down 30% year over yearThe report believes this mainly reflects depletion of self-owned ore; future copper output is expected to stay around 60 kt per year and rely on purchased ore.
• Lithium product sales and gross profitSales of 54.4 kt, up 38.6% year over year; gross profit of RMB 710 million, up 94% year over yearDriven by higher volume and rising lithium prices in 2H25; the company targets 80-90 kt LCE lithium shipments in 2026.
• Precursor sales and gross profitSales of 108.4 kt, up 5% year over year; gross profit down 40% year over year to RMB 755 millionVolume grew but profitability was under pressure.
• Cathode materials sales and gross profitSales of 116.4 kt, up 77% year over year; gross profit of RMB 1.4 billion, up 108% year over yearAbout 10.2% of total gross profit.
• DividendRMB 0.5 per shareFull-year 2025 DPS was flat year over year, implying a payout ratio of 15.5%, below 20.2% in 2024.

Impact & implications

The improved performance shows that Huayou Cobalt has high operating leverage to metal prices such as nickel, cobalt, and lithium, as well as to the ramp-up of key projects. If nickel prices continue to rise, the Indonesian nickel projects ramp up smoothly, and NCM precursor demand recovers, earnings may continue to benefit; however, if raw material costs rise, copper ore substitution costs increase, or Zimbabwe export suspensions affect the lithium business, part of the earnings upside may be offset.

Risks

• Cobalt and copper prices below expectations.
• Precursor sales falling short due to weaker-than-expected demand.
• Slower-than-expected ramp-up of Indonesian nickel projects.
• Rising sulfur and nickel ore prices may partially offset the benefits of higher nickel prices.
• Zimbabwe export suspensions may negatively affect the lithium business.
• After self-owned copper ore is depleted, reliance on purchased ore may affect costs and production stability.
• Morgan Stanley has or seeks business relationships with the covered company, so investors should note potential conflicts of interest.

What to watch

• 1Q26 nickel price trends and their pass-through to nickel business gross profit.
• Ongoing ramp-up progress at the Huayue and Huafei projects.
• Changes in cobalt, copper, and lithium prices.
• Recovery in NCM precursor demand and changes in gross margin.
• Whether the 2026 target of 80-90 kt LCE lithium shipments can be achieved.
• Changes in Zimbabwe's lithium-related export policies.
• Trends in sulfur, nickel ore, and purchased copper ore costs.