TNMG(SZ:000630) Xin Lang Cai Jing·2025-11-20 12:35Core Viewpoint - Tongling Nonferrous Metals is a leading copper smelting enterprise in China, covering the entire industry chain from resource extraction to smelting and processing. The company is the largest producer of cathode copper in the country, with smelting capacity exceeding 1.7 million tons. However, since 2024, tightening copper ore supply has led to a decline in copper smelting fees, resulting in a slight decrease in the company's copper product profit margins. There are concerns about whether the company's substantial smelting capacity will be impacted by the continued decline in smelting fees, which could squeeze profit margins [1]. Copper Products Sector - From an industry perspective, the growth rate of electrolytic copper production in 2026-2027 may be lower than that of copper ore supply, indicating potential upward improvement in smelting fees. Demand from emerging sectors such as renewable energy and AI data centers is expected to drive an increase in copper demand. However, due to ongoing disruptions at the mining level and a slowdown in the expansion of midstream smelting capacity, the global copper supply-demand surplus may decrease, supporting an upward trend in copper prices in the medium term [2]. - On the company level, the expansion of the Mirador copper mine is expected to enhance the company's copper concentrate self-sufficiency and reduce production costs. The integrated project for green intelligent copper-based new materials is anticipated to expand the company's smelting capacity. With expectations of improving industry smelting fees and rising copper prices, the increase in resource self-sufficiency is likely to enhance profit elasticity in the smelting segment [2]. - The company is also focusing on high-end copper processing and precious metal resources, which are expected to drive profitability. The subsidiary Tongguan Copper Foil was listed separately in 2022, and the demand for high-end electronic copper foil products is anticipated to grow in the context of rapid development in AI and electronic communication industries. Additionally, the precious metals segment, including gold, is expected to continue contributing to the company's profits, with rising prices anticipated due to deteriorating dollar credit conditions. The expansion of the Mirador copper mine is expected to increase gold production, potentially leading to a rise in both volume and price in the gold segment [2]. Profit Forecast and Investment Recommendation - The company is projected to have EPS of 0.27, 0.38, and 0.43 yuan for the years 2025-2027. Based on a comparable company's 2026 PE of 16X, a target price of 6.08 yuan is set for the company. Therefore, the initial coverage recommends a buy rating for the company [3].