Goldman Sachs maintains Buy on CMOC Group, with valuation appeal offsetting rising cost pressure

Overview

This report is Goldman Sachs' review of CMOC Group's 1Q26 results. The company's 1Q26 net profit and EPS rose 97% and 98% year-on-year, respectively, while recurring net profit reached RMB 8.1bn, equivalent to 23% of Goldman Sachs' full-year 2026 forecast and 25% of Bloomberg consensus. Goldman Sachs believes the results were slightly below its expectations but in line with consensus, with the key differences stemming from weaker-than-expected gross profit in the Brazil gold, niobium, and phosphate businesses, as well as potential future increases in sulfur, sulfuric acid, diesel, and transportation costs for the DRC copper business.

Core views

Goldman Sachs' core view is that, on one hand, the DRC copper business has strong competitiveness in raw material procurement due to its high profit margins, so the risk of operational disruption from the global sulfur shortage is limited; on the other hand, rising raw material and energy costs will gradually flow into the cost base after existing inventories are consumed, and may start to be reflected from the latter part of 2Q26. Even so, higher copper prices, recovery in DRC cobalt sales, and strong minor metals prices are expected to drive 2026E recurring profit growth of 74% year-on-year. The current share price implies a copper price of about US$8,615/t, 35% below the spot level of about US$13,300/t, so Goldman Sachs believes the valuation remains attractive.

Analysis framework

The report updates the company's earnings forecasts, target price, and risk-reward profile by combining quarterly results breakdowns, segment-level production and gross profit performance, commodity price and cost assumptions, expert call feedback, and a valuation framework based on historical P/B and ROE correlation.

Methodology notes

• Valuation methodsP/B vs. ROE correlation

  Target price methodology based on the historical correlation between P/B and ROE

  Goldman Sachs keeps its valuation methodology unchanged, using 2026E P/B assumptions of 4.28x/5.04x for H/A shares and ROE of 35.2% to derive 12-month target prices of HK$25.0/RMB 26.0.

• Earnings forecastSegment earnings revision

  Segment earnings adjustment

  Goldman Sachs cuts 2026-2028E recurring earnings by 3%-6%, mainly incorporating higher unit costs in the DRC copper business and the weaker 1Q26 performance of the Brazil niobium and phosphate businesses.

• Factor analysisGS Factor Profile

  Comparison across growth, financial returns, valuation multiples, and composite factors

  GS Factor Profile compares stocks on a relative basis against Goldman Sachs' coverage universe and industry peers across growth, financial returns, valuation multiples, and composite metrics.

Asset mapping & comparison

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

• 3993.HK

  Core covered name, CMOC Group H shares

  Strengths

  Buy rating, target price of HK$25.00, and implied upside of 32.8%; benefits from higher copper prices, recovery in DRC cobalt sales, and long-term copper production expansion.

  Weaknesses

  2026-2028E recurring earnings were cut by 3%-6%; DRC copper business costs are rising, and earnings in the Brazil niobium and phosphate businesses are weaker than expected.

  Comparison

  The current share price implies a copper price of about US$8,615/t, 35% below the spot price of about US$13,300/t; valuation looks attractive relative to the commodity price environment.

  Risks

  Falling commodity prices, declining ore grades, transportation bottlenecks, slower-than-expected project execution, overseas FX and country risks, and hedging risks in the trading business.

• 603993.SS

  A-share mapping of the same company

  Strengths

  Buy rating, target price of RMB 26.00, current price of RMB 19.37, and implied upside of 34.2%.

  Weaknesses

  Target price cut from RMB 28.00 to RMB 26.00, reflecting downward earnings revisions and rising costs.

  Comparison

  The A-share valuation methodology corresponds to 2026E P/B of 5.04x, and the target price implies P/E of 19.5x, at the high end of the global peer mid-cycle P/E range of 7-20x.

  Risks

  Same as H shares, while also being affected by A-share valuation premium and changes in market risk appetite.

• Copper

  Core earnings-driving commodity

  Strengths

  Higher copper prices are one of the main drivers behind Goldman Sachs' forecast for 74% year-on-year growth in 2026E recurring profit.

  Weaknesses

  If copper prices are weaker than expected, revenue, profit, and valuation will be directly pressured.

  Comparison

  The current H-share price implies a copper price materially below spot levels, which is a source of valuation appeal.

  Risks

  Global demand, supply disruptions, inventory cycles, and changes in macro interest rates may affect copper prices.

• DRC copper-cobalt business

  Core production and growth asset

  Strengths

  1Q26 copper production was 188kt, up 10% year-on-year; cobalt production was 30kt, above expectations, and the recovery in cobalt exports has started to contribute to sales volume.

  Weaknesses

  Rising sulfur, sulfuric acid, diesel, and transportation prices may push up unit costs.

  Comparison

  Its high profit margin makes it more competitive in procuring sulfur and other raw materials globally, so the risk of operational disruption is assessed as limited.

  Risks

  Raw material shortages, transportation bottlenecks, country risk, and concentrated cost recognition after inventories are depleted.

• Brazil niobium, phosphate, and gold businesses

  Incremental and non-copper business exposure

  Strengths

  Following the acquisition completed at the end of January 2026, the Brazil gold mine contributed 43koz of gold production in 1Q26.

  Weaknesses

  Niobium and phosphate gross profit in 1Q26 reached only 13% of Goldman Sachs' full-year forecast, mainly due to lower-than-expected realized prices.

  Comparison

  Compared with the DRC copper-cobalt business, the Brazil niobium and phosphate businesses were an important drag causing 1Q26 results to fall short of Goldman Sachs' expectations.

  Risks

  Commodity prices, integration execution, cost control, and project capex risks.

Key data

• 1Q26 net profitRmb7.76bnCalculated under China accounting standards, up 97% year-on-year.
• 1Q26 EPSRmb0.363/shareUp 98% year-on-year.
• 1Q26 recurring net profitRmb8.1bnEquivalent to 23% of Goldman Sachs' full-year 2026 forecast and 25% of Bloomberg consensus.
• 2026E recurring profit growth+74% yoyGoldman Sachs expects it to be driven by higher copper prices, recovery in DRC cobalt sales, and strong minor metals prices.
• Earnings forecast revision2026-2028E cut by 3%-6%Reflecting higher costs in the DRC copper business and weaker profit in the Brazil niobium and phosphate businesses.
• 3993.HK target priceHK$25.00Previous target price was HK$27.00; current price is HK$18.82, implying 32.8% upside.
• 603993.SS target priceRmb26.00Previous target price was RMB 28.00; current price is RMB 19.37, implying 34.2% upside.
• DRC copper production188ktUp 10% year-on-year in 1Q26, reaching 23% of Goldman Sachs' full-year forecast and broadly in line with expectations.
• DRC cobalt production30ktRoughly flat year-on-year and above Goldman Sachs' expectations; 1Q26 cobalt sales deliveries were about 2kt.
• Operating cash flowRmb11.3bnUp 7.6x year-on-year in 1Q26.
• Free cash flowRmb0.4bnStill positive in 1Q26, but down 29% year-on-year.
• Market capitalizationHK$402.6bn / US$51.4bnDisclosed in the report's key data.

Impact & implications

The implication for the investment view is that short-term earnings forecasts have been cut due to cost pressure and weaker-than-expected Brazil operations, but the rating thesis remains supported by higher copper prices, recovery in cobalt sales, long-term production expansion, and valuation discount. If the 2028E production target is achieved, the current H-share price implies a copper price materially below spot levels, offering room for valuation rerating; however, the pace at which costs are recognized may affect quarterly margins.

Risks

• Copper, cobalt, niobium, phosphate, and other commodity prices may be weaker than expected.
• Operational risks such as sudden declines in ore grade or transportation bottlenecks.
• Project execution may be slower than expected, affecting the continuation of the company's growth trajectory.
• Overseas assets face FX and country risks.
• Hedging operations in the trading business may bring risks.
• Rising sulfur, sulfuric acid, diesel, and transportation costs may compress margins in subsequent quarters.

What to watch

• Whether unit costs in the DRC copper business rise as expected from the latter part of 2Q26.
• Whether tight global sulfur and sulfuric acid supply affects the continuity of DRC copper production.
• The pace of recovery in DRC cobalt exports and sales.
• Whether realized prices and gross margins for Brazil niobium and phosphate improve.
• Changes in copper prices relative to Goldman Sachs' long-term assumptions and spot levels.
• Progress toward the 2028E copper production target of 1 million tons and the Cangrejos gold-copper project.
• Changes in operating cash flow, free cash flow, and net gearing.