Goldman Sachs refreshes China commodities and agriculture earnings forecasts, downgrades Yankuang-A to Sell

Overview

In this report, Goldman Sachs refreshes earnings forecasts for its China commodities and agriculture coverage basket, with the core approach of incorporating year-to-date commodity price changes into 2026E-2028E assumptions. In basic materials, earnings forecasts are lowered for steel, cement, gold, and paper, and raised for coal and copper; in agriculture, earnings forecasts are lowered for live hogs, fertilizers, and conventional seeds, but the report still expects a domestic hog-sector cycle recovery in 2H26E and margin recovery in phosphate fertilizers. The most important rating change is the downgrade of Yankuang-A from Neutral to Sell, because the A-share price implies a coal price expectation above both spot and Goldman Sachs' base-case assumption.

Core views

The report's core view is that sector divergence is intensifying: coal is supported by coal chemical demand, declining imports, peak season, and potential safety inspections constraining supply; copper is supported by global supply disruptions and ex-US market deficits; steel and cement are dragged by weak demand, delayed enforcement of capacity discipline, and weaker prices; aluminum spreads are expected to normalize as new supply is released; short-term gold forecasts are lowered due to mark-to-market updates, but the long-term view remains constructive; in agriculture, hog prices are weak in the short term but supply-demand improves in 2H26E, while phosphate fertilizers are pressured short term by rising sulfur costs but margins are expected to recover later.

Analysis framework

The report uses commodity mark-to-market pricing, supply-demand fundamentals, and company earnings sensitivity as its main framework, mapping realized 1H26 prices, 2H26E price assumptions, global commodities team forecasts, cost changes, capacity discipline, import and inventory factors into 2026E-2028E earnings and 12-month target prices for covered companies. Yankuang valuation uses the historical P/B and ROE relationship, with separate target prices and ratings for A-shares and H-shares.

Methodology notes

• Earnings forecastCommodity mark-to-market and earnings sensitivity

  mark-to-market price assumptions

  The report adjusts price, gross profit, and earnings forecasts for sectors including steel, coal, cement, aluminum, copper, gold, paper, live hogs, fertilizers, and seeds based on year-to-date price performance.

• Industry analysisSupply-demand fundamentals analysis

  S/D fundamentals

  Coal judgments are based on coal chemical demand, import changes, seasonality, and safety inspections; copper judgments are based on the ex-US market deficit, US inventories, and recovery timing at mines such as Grasberg and Kamoa-Kakula.

• Valuation methodsHistorical P/B vs. ROE relationship

  Yankuang target price methodology

  The Yankuang-H target price of HK$15.0 is based on 2026E P/B of 1.72x and 2026E ROE of 17.6%; the Yankuang-A target price of Rmb19.0 is based on 2026E P/B of 2.39x and 2026E ROE of 17.6%.

• Investment research toolGS Factor Profile

  Growth, Financial Returns, Multiple and Integrated percentiles

  The appendix explains that Goldman Sachs compares stocks versus the market and sector peers using growth, financial returns, valuation multiples, and integrated metrics to provide investment context.

Asset mapping & comparison

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

• Yankuang Energy (A)

  Core downgraded name

  Strengths

  The company is a large coal producer in China and Australia, with 2025A self-produced sales volume of 165mnt; its coal chemical business is supported by higher oil prices and coal chemical demand.

  Weaknesses

  The A-share price implies a QHD5500 coal price of Rmb1,244/tonne, above the current spot price of Rmb863/tonne; Goldman Sachs' 2026E earnings forecast is 11% below Refinitiv consensus.

  Comparison

  Yankuang-H remains Neutral with the target price implying about 0% upside; Yankuang-A is downgraded to Sell with the target price implying about 24% downside, weaker than the coverage basket average of about 5% upside.

  Risks

  Coal prices above expectations, slower-than-expected renewable substitution, rising oil prices, supply disruptions from coal mine safety or environmental inspections, faster-than-expected progress on new mine projects, or parent asset injection could all constitute upside risk for the A-share.

• Coal sector: Shenhua, Chinacoal, Yankuang

  One of Goldman Sachs' preferred commodity themes

  Strengths

  Rising coal chemical demand, declining imports, the arrival of peak season, and potential safety inspections may support coal prices; 2026E earnings forecasts are raised by 9%-17%.

  Weaknesses

  Valuations of some stocks already reflect more optimistic coal prices, especially Yankuang-A.

  Comparison

  Goldman Sachs maintains Buy on Chinacoal-H/A and others, while assigning differentiated ratings to Yankuang A/H due to valuation and share-price differences.

  Risks

  Uncertainty around coal prices, imports, coal chemical demand, policy safety inspections, and the pace of renewable substitution.

• Copper sector: Zijin, JXC, CMOC, MMG

  Commodity theme on which Goldman Sachs remains positive

  Strengths

  Copper price forecasts are revised up, the ex-US market is expected to remain in deficit, and mine disruptions are recovering more slowly than expected; 2026E-2027E earnings for related companies are raised by 1%-21%.

  Weaknesses

  Target price revisions are only 0%-4%, suggesting some positives may already be absorbed in valuations.

  Comparison

  Related copper stocks maintain Buy ratings, outperforming more pressured sectors such as steel, aluminum, and paper.

  Risks

  Continued US inventory accumulation, faster-than-expected mine recovery, weaker-than-expected global demand, or copper prices below forecasts.

• Steel sector

  Earnings cuts and continuation of depressed margins

  Strengths

  Anti-involution efforts and long-term capacity reduction plans are still in place.

  Weaknesses

  Delayed enforcement of capacity and production discipline in 2026E, with rebar, HRC, and CRC per-ton gross profit cut by Rmb20-120/tonne.

  Comparison

  Baosteel remains Neutral; Maanshan-H/A remains Neutral/Sell; Angang-H/A remains Sell/Sell.

  Risks

  Persistently weak demand and worse-than-expected capacity discipline; margins could improve if supply constraints are implemented faster.

• Cement sector

  Short-term earnings under pressure but with stabilization expectations in 2H26E

  Strengths

  Increased central government support for infrastructure financing could help stabilize construction demand in 2H26E.

  Weaknesses

  Weak prices in 2Q26E, with 2026E per-ton cement gross profit cut by Rmb2-12/tonne, and even weaker prices in some regions.

  Comparison

  Conch-H/A and CNBM remain Buy; CRBMT and BBMG-H remain Neutral; WCC and BBMG-A remain Sell.

  Risks

  Weaker-than-expected property and infrastructure demand, regional price competition, and the timing of policy support implementation.

• Aluminum sector: Chalco, Hongqiao

  Cautious and neutral positioning

  Strengths

  Current industry profitability is strong, and 1H26E SHFE aluminum spreads remain high.

  Weaknesses

  New supply expansion, idle capacity restarts, and replacement project ramp-ups may drive spread normalization in 2H26E and 2027E.

  Comparison

  Chalco-H/A and Hongqiao both remain Neutral, with unchanged target prices.

  Risks

  The pace of supply expansion, capacity restarts, and changes in aluminum prices and costs.

• Gold sector: Zhaojin

  Short-term forecast cut but Buy maintained

  Strengths

  The global commodities team remains bullish on gold and maintains its end-2026 forecast of US$5,400/oz.

  Weaknesses

  The 2026E gold price forecast is lowered 5% to US$4,809/oz on a mark-to-market basis; Zhaojin's 2026E earnings are cut 3%, and the target price is cut 2%.

  Comparison

  Relative to sectors such as paper and steel, Goldman Sachs still keeps Buy on Zhaojin.

  Risks

  Gold prices, the US dollar interest-rate environment, and changes in costs and production.

• Agriculture sector: live hogs, fertilizers, seeds, animal health and feed additives

  Earnings forecasts refreshed with subsector divergence

  Strengths

  Goldman Sachs still likes the domestic live hog cycle upturn in 2H26E and margin recovery in phosphate fertilizers after the planting season; YTH, QHL, XLX, and some leading farming/feed names remain Buy.

  Weaknesses

  1H26E hog prices and phosphate fertilizer gross margins are under pressure, and Longping's Brazil corn seed volume and earnings forecasts are revised down.

  Comparison

  Muyuan-A/H, DBN, Haid, YTH, QHL, and XLX remain Buy; Wens, NHL, and New Yonfer remain Neutral; Longping and Denghai remain Sell; Adisseo remains Buy, and Ringpu remains Sell.

  Risks

  Hog prices, feed costs, input costs such as sulfur, fertilizer price management, Brazilian farmer purchasing timing, and corn planting area.

Key data

• Report date2026-06-08Equity Research, 8 June 2026, 11:00PM HKT.
• Target price revision range-12% to +20%Magnitude of target price revisions across the coverage basket.
• 2026E steel per-ton gross profit cutRmb20-120/tonneReflecting 1H26 mark-to-market pricing; the report expects delayed enforcement of capacity and production discipline, with depressed margins persisting.
• Steel earnings revisionsBaosteel and Maanshan-H/A 2026E earnings cut by 12%-40%; Angang 2026E loss expected at Rmb4.8bnAngang's previous loss forecast was Rmb4.0bn.
• Coal price assumptionsQHD5500 2026E forecast raised by Rmb70/tonne; 2H26E average spot coal price Rmb950/tonne; 2027E Rmb850/tonneThe report views coal supply-demand fundamentals as positive.
• Coal earnings revisionsShenhua-H/A, Chinacoal-H/A and Yankuang-H/A 2026E earnings raised by 9%-17%2027E-2028E earnings are broadly unchanged.
• Yankuang-A rating and target priceSell; 12-month target price Rmb19.0/shareDowngraded from Neutral; the target price implies about 24% downside.
• Yankuang-H rating and target priceNeutral; 12-month target price HK$15.0/shareThe target price implies about 0% upside.
• Yankuang-A valuation disconnectThe share price implies a QHD5500 coal price of Rmb1,244/tonne, versus spot at Rmb863/tonneThis is the core reason for the A-share downgrade.
• Copper price forecast2026E SHFE copper price raised 4% to US$6.05/lb; 2027E raised 14% to US$6.26/lbThe global commodities team expects ex-US market deficits of 640kt/170kt in 2026E/2027E, respectively.
• Copper stock earnings revisionsZijin-H/A, JXC-H/A, CMOC-H/A and MMG 2026E-2027E earnings raised by 1%-21%Related copper stocks maintain Buy ratings, with target price revisions of 0%-4%.
• Gold price forecast2026E gold price forecast lowered 5% to US$4,809/ozThe global commodities team still maintains its end-2026 forecast of US$5,400/oz, and Zhaojin remains Buy.
• Live hog price assumption2026E base hog price lowered 5% to Rmb12.8/kgGoldman Sachs expects an upward industry cycle in 2H26E due to about a 5% decline in supply plus seasonality.
• Live hog and feed earnings revisionsMuyuan, Wens, NHL, DBN and Haid 2026E earnings cut by 10%-67%2027E-2028E earnings revisions are -7% to +5%.
• Phosphate fertilizer gross profit revision1H26 per-unit gross profit lowered by 12%-23%Mainly because input costs such as sulfur are 12% higher than previously assumed.
• Longping Brazil corn seed business2026E-2028E volume lowered by 10%-12%, earnings lowered by 10%-27%Due to delayed purchasing by local farmers, while high fertilizer prices may suppress corn planting.

Impact & implications

The investment implication is that sector allocation should tilt more toward coal and copper, while remaining selective and cautious on steel, paper, aluminum, lithium, and parts of the agriculture chain. The downgrade of Yankuang-A shows that even if coal fundamentals improve, valuation can still imply downside risk if it already embeds excessively high coal prices; by contrast, copper stocks and some coal and agriculture leaders still have relatively better earnings and rating support within Goldman Sachs' framework.

Risks

• Commodity prices deviating from Goldman Sachs' assumptions, especially coal, copper, gold, aluminum, steel, and paper prices.
• China steel, cement, and property-chain demand coming in weaker than expected, or continued delays in enforcing capacity discipline.
• Changes in coal safety inspections, environmental inspections, imports, and coal chemical demand could amplify coal price volatility.
• Recovery in copper mine disruptions, changes in US inventories, and global demand could alter the logic for higher copper prices.
• Volatility in live hog, fertilizer, and feed costs could lead to further revisions in agriculture earnings forecasts.
• The Sell rating on Yankuang-A carries upside risk: if coal prices are significantly above expectations, renewable substitution is slower than expected, or asset injection progresses faster than expected, the share price may outperform the report's view.

What to watch

• Whether QHD5500 spot coal prices approach or deviate from Goldman Sachs' assumptions of Rmb950/tonne in 2H26E and Rmb850/tonne in 2027E.
• Whether coal chemical demand, coal imports, peak-season demand, and safety inspections continue to support coal supply and demand.
• The ex-US copper market deficit, US inventory accumulation, and recovery progress at mines such as Grasberg and Kamoa-Kakula.
• Whether anti-involution efforts, capacity cuts, and production discipline in steel are truly implemented in 2H26E.
• Whether infrastructure financing support drives stabilization in cement demand and prices in 2H26E.
• Whether reduced live hog supply in 2H26E and seasonal demand bring price increases.
• Whether input costs such as sulfur and domestic fertilizer price management policies improve phosphate fertilizer margins.
• Longping Brazil corn seed orders, delayed farmer purchases, and the impact of fertilizer prices on corn planting area.