"Large Banks" Huayan raised MMG's target price to 9.1 yuan. Copper fundamentals have improved, but short-term upside potential is limited

Huayan published a report stating that MMG (01208.HK) has strong growth momentum in the fourth quarter, with stable copper and zinc production and rising metal prices. It is expected that the company's production will grow moderately by 2026, with stable output from the Las Bambas mine and production increases at the Kinsevere mine depending on power supply. Due to improved copper fundamentals but limited short-term upside, it maintains a "Hold" rating and adopts a forward price-to-earnings ratio of 12 times (previously 9 times), raising the target price from HKD 3.2 to HKD 9.1, implying an upside of about 11.9%.

Huayan expects that the Las Bambas mine will operate smoothly this season, with copper production expected to exceed 100,000 tons in the fourth quarter, and all on-site inventory will be sold by the end of the year. The expansion of the Kinsevere mine is proceeding as planned, and with the new contractor's operations stabilizing, production at the Khoemacau mine is expected to increase quarterly. The performance of the Dugald River and Rosebery mines remained stable this season, as the overall environment in the commodity market remains optimistic, with tight copper concentrate supply and zinc prices rising due to seasonal factors.

Huayan also expects that MMG will achieve an annual production guidance of approximately 500,000 tons of copper and about 230,000 tons of zinc this year, with moderate growth expected by 2026. However, given the limited production growth, profitability remains highly sensitive to copper price fluctuations, with an expected profit change of about 1.7% for every 1% change in copper prices by 2026