Summary of Zhejiang Huayou Cobalt Co Ltd Conference Call Company Overview - **Company**: Zhejiang Huayou Cobalt Co Ltd - **Ticker**: 603799.SS - **Industry**: Greater China Materials - **Market Cap**: Rmb104,001 million - **Current Share Price**: Rmb61.46 (as of October 17, 2025) - **Price Target**: Rmb76.00, indicating a 24% upside potential Key Financial Highlights - **3Q25 Net Profit**: Rmb1.5 billion, up 11.5% YoY and 3% QoQ [1] - **1H25 Profit**: Rmb4.2 billion, up 40% YoY [1] - **Revenue**: Increased approximately 12% QoQ to Rmb21.7 billion [1] - **Gross Margin**: Remained stable at 16.2% [1] - **Gross Profit**: Increased by approximately Rmb400 million (13% QoQ) to Rmb3.5 billion [1] - **Financial Expenses**: Increased by Rmb206 million QoQ, likely due to foreign exchange losses [1] - **Effective Tax Rate**: 16.1% in 3Q25 compared to 8.7% in 2Q25 [1] - **Net Gearing**: Decreased by 7.2 percentage points QoQ to 55.7% due to the conversion of Rmb7 billion convertible bonds into equity [1] Market Dynamics - **Cobalt Prices**: Expected to rise, with a 14% increase in October and a 34% increase in 3Q25, driven by the DRC's extended cobalt export ban and new export quotas [2] - **Production Capacity**: Huayou can achieve approximately 10% cobalt production as a byproduct from its HPAL nickel smelting capacity in Indonesia, estimated at 12,000 tons attributable production in 2025 [2] Valuation and Risks - **Valuation Methodology**: Price target derived from a DCF model with a WACC of 10.9% and a steady-state revenue growth rate of 2% [7] - **Upside Risks**: Improvement in cobalt prices, copper price hikes, rising sales volume of NCM precursors, and cost declines on self-supply of nickel raw materials [9] - **Downside Risks**: Lower-than-expected cobalt and copper prices, weaker-than-expected demand affecting precursor sales volume, and slower ramp-up of Indonesia nickel projects [9] Analyst Ratings - **Stock Rating**: Overweight [4] - **Industry View**: Attractive [4] Additional Insights - **Earnings Consistency**: Financial results are in line with estimates, indicating stable performance amidst market fluctuations [1] - **Future Outlook**: Continued benefits from rising cobalt prices are anticipated, positioning Huayou favorably in the market [2]

Investment Rating - The stock rating for Zhejiang Huayou Cobalt Co Ltd is Equal-weight [4] - The industry view is Attractive [4] Core Insights - Zhejiang Huayou Cobalt Co Ltd reported preliminary profit for 1H25 of Rmb2.6-2.8 billion, representing a year-on-year increase of 56-68%, aligning with consensus estimates [1][2] - The net profit for Q2 2025 is estimated to be Rmb1.35-1.55 billion, reflecting an 18-35% year-on-year increase and an 8-24% quarter-on-quarter increase [1] - The substantial profit growth is attributed to the production from the Huafei project, stable operations and cost savings from the Huayue project, increased self-sufficiency in raw materials, rising cobalt prices, and improved operational efficiency [2] Financial Projections - The expected EPS for fiscal years ending in 2023, 2024, 2025, and 2026 are Rmb2.05, Rmb1.34, Rmb1.42, and Rmb2.00 respectively [4] - Revenue projections for the same fiscal years are Rmb65,936 million, Rmb63,642 million, Rmb66,235 million, and Rmb70,900 million respectively [4] - The company is anticipated to benefit from rising cobalt prices in 2H25, which have increased approximately 7% since the DRC announced an extension of the cobalt export ban [3]