China Securities Co., Ltd.: Rated "buy" for CMOC Group Limited (03993), KFM Phase II steadily advancing, performance hitting new highs.

China Securities Co., Ltd. released a research report stating that it is expected that CMOC Group Limited (03993) will have a net profit attributable to the parent company of 19.989 billion yuan, 24.8 billion yuan, and 27.928 billion yuan respectively from 2025 to 2027, corresponding to PEs of 16.28, 13.12, and 11.65 times, respectively. Considering the company's industry position, growth potential, and low-cost advantages, the company is given a "buy" rating. With the potential and efforts of the two world-class projects TFM and KFM, the company's copper production in the first three quarters increased by 14% to 543,400 tons, and the company announced an investment of not more than 1.084 billion US dollars to build the KFM phase II project, which is expected to start production in 2027, adding an average of 100,000 tons of copper metal per year after reaching full production. China Securities Co., Ltd.'s main points are as follows: Event The company released the third quarter report for 2025. In the first three quarters of 2025, the company achieved operating income of 145.485 billion yuan; net profit attributable to the parent company was 14.28 billion yuan, up 72.61% year-on-year, setting a new historical high for the same period and surpassing the full-year figure for the previous year. In Q3, net profit attributable to the parent company was 5.608 billion yuan, up 96.40% year-on-year and 18.69% quarter-on-quarter. The company released an announcement about investing in the construction of the KFM Phase II project in the Democratic Republic of Congo (DRC). On October 24, 2025, the 7th meeting of the 7th board of directors of the company approved the proposal to invest in the construction of the KFM Phase II project in the DRC within the investment range of not more than 1.084 billion US dollars. Quantity: Significant increase in copper production, steady progress in KFM Phase II Production in the first three quarters of 2025: copper/cobalt/molybdenum/tungsten/niobium/phosphorus fertilizer were 543,400 tons/88,000 tons/10,611 tons/6,000 tons/7,841 tons/912,800 tons, all exceeding the planned targets. Among them, copper production increased by 14.14% year-on-year, setting a new historical high; copper sales volume was 520,300 tons, up 10.56% year-on-year. With the potential and efforts of the two world-class projects TFM and KFM, the company saw a significant increase in copper production in the first three quarters, aiming for a long-term copper production target of 800,000 to 1 million tons. The company actively promotes new projects and announced an investment of not more than 1.084 billion US dollars to build the KFM Phase II project. It is expected to start production in 2027, adding an average of 100,000 tons of copper metal per year after reaching full production. In addition, to ensure long-term local power supply, the company is actively building the diversion tunnel and bridge for the Heshima hydropower station with a capacity of 220 MW. Price: Major ore types of the company all saw a rise in prices in Q3 2025 In Q3 2025, the LME copper spot price increased by 2.9% quarter-on-quarter to $9,797 per ton. The average prices of cobalt/molybdenum iron/APT/niobium iron/phosphoric acid-ammonium all changed quarter-on-quarter by +11.4%/+18.0%/+38.9%/+3.4%/+0.6%. Cost: Fine management combined with technological innovation, significant progress in cost reduction and efficiency improvement During the peak period of "production and sales flourishing", the company implemented cost reduction and efficiency improvement practices, resulting in a 10.94% year-on-year decrease in operating costs in the first three quarters. In the next stage, the company will continue to implement strategic reforms in management mechanisms and refine operational management, establish lean production methods, and drive a new round of rapid growth. The allocation of export quotas in the DRC has been determined, and the central price of cobalt may continue to rise The Congolese government announced the latest enterprise quotas on October 11, with CMOC Group Limited receiving the largest quota, with a remaining export quota of 6,500 tons for the rest of 2025, totaling 35.9% of the quota. According to the current allocation, it is estimated that in 2026, they will receive an export quota of 31,200 tons, accounting for approximately 27.3% of the production volume in 2024. The future supply of cobalt will tighten, and the central price of cobalt is expected to remain high. According to the current export quota policy in the DRC, the export volume in the next two years will be only 96,600 tons, a decrease of approximately 100,000 tons. Considering the supply of 270,000 tons and demand of 230,000 tons in 2024, the market surplus will decrease by about 70,000 tons after reducing the supply by 100,000 tons. From excess to shortage, about 30,000 tons, the central price of cobalt may continue to rise.