UBS: Zijin Gold International (02259) reported a profit far exceeding expectations last year and maintains a "buy" rating with a target price of HK$297.

UBS issued a research report stating that ZIJIN GOLD INTL (02259) achieved a 233% year-on-year increase in net profit to $1.6 billion last year, exceeding the upper limit of the preliminary profit forecast previously announced, and exceeding the bank and market expectations by $300 million and $200 million respectively. The group announced a full-year dividend of HK$1.5 per share, with a payout ratio of less than 32%, which is roughly the same as Zijin Mining Group's 31%. The bank maintains a "buy" rating with a target price of HK$297. The bank pointed out that ZIJIN GOLD INTL's profit far exceeded expectations mainly due to: 1) a gold production of 45.4 tons (excluding 1.5 tons from the Bogla gold mine), slightly higher than the guidance of 43 tons, with a gold sales volume of 46 tons; 2) an average selling price of $3,542 per ounce, about 2% higher than the annual average gold price; 3) the minority shareholder equity ratio has decreased from 22% in 2024 to 14%, mainly due to the acquisition of Akyem and RG mines, both of which are fully owned. Unit costs rose by 12% year-on-year to $1,722 per ounce (about $390 per gram), mainly due to rising material costs and increased amortization, related to assumptions about the old mine life of the Akyem mine. The management of ZIJIN GOLD INTL forecast a gold production of 59.2 tons in 2026, higher than the previous guidance of 57 tons, with a production target of 70 to 75 tons in 2028 (including the Bogla gold mine). UBS expects the market to react positively to the performance, as this is another strong performance since the listing of Zijin Gold. Currently, Zijin Gold's forecast P/E ratio is 17.5 times. The recent gold price may continue to be influenced by macro uncertainties such as conflicts in the Middle East and fluctuations in oil prices, which may have a negative impact on the sentiment of gold mining stocks. However, the bank remains constructive on the outlook for gold prices and believes that recent weakness in stock prices may provide more attractive buying opportunities for gold mining stocks.