Summary of the Conference Call Transcript Company Overview - **Company**: Zhejiang Huayou Cobalt Co Ltd - **Ticker**: 603799.SS - **Market Cap**: Rmb 87,248.7 million - **Current Share Price**: Rmb 51.56 (as of September 19, 2025) - **Price Target**: Rmb 43.00 - **52-Week Range**: Rmb 54.75 - 21.61 - **Shares Outstanding**: 1,692 million - **Average Daily Trading Value**: Rmb 1,725 million Industry Context - **Industry**: Cobalt and Nickel Production - **Key Market Dynamics**: - The Democratic Republic of Congo (DRC) has extended its cobalt export ban until October 15, 2025, followed by export quotas that will limit the 2026-27 quota to 40% of normal production levels. This is significant as DRC accounts for 70% of global cobalt supply [2][4]. - Nickel smelters in Indonesia, which utilize laterite nickel ore and the HPAL method, are expected to benefit from a potential increase in cobalt prices, as they typically produce about 10% cobalt as a byproduct [2]. Production Estimates - **Cobalt Production**: - Huayou's cobalt production volume from its Indonesian smelting operations is estimated to be approximately 20,000 tons (with 11,000 tons attributable based on shareholding) in 2025 [2]. Valuation and Risks - **Valuation Methodology**: - The price target is derived from a Discounted Cash Flow (DCF) model, assuming a Weighted Average Cost of Capital (WACC) of 10.9% and a steady-state revenue growth rate of 2% [7]. - **Risks to Upside**: - Improvement in cobalt prices alongside demand - Increase in copper prices - Rising sales volume of NCM (Nickel Cobalt Manganese) precursors - Cost reductions in NCM due to self-supply of nickel raw materials from Indonesian projects coming online [9]. - **Risks to Downside**: - Lower-than-expected cobalt and copper prices - Missed precursor sales volume due to weaker-than-expected demand - Slower-than-expected ramp-up of Indonesian nickel projects [9]. Analyst Insights - **Analyst**: Chris Jiang, Morgan Stanley Asia Limited - **Stock Rating**: Equal-weight - **Industry View**: Attractive - **Analyst Certification**: The analyst certifies that views about the company and its securities are accurately expressed and that no compensation has been received for these views [14]. Additional Notes - The report indicates a "very likely" probability (70% to 80%) for the scenario regarding cobalt supply impacts due to DRC's export policies [3]. - The company is positioned to benefit from the ongoing dynamics in the cobalt market, particularly with the expected price increases due to supply constraints from the DRC [2][4].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Cobalt and Nickel Production in the Asia Pacific region, specifically focusing on the Democratic Republic of the Congo (DRC) and its impact on Chinese producers [2][8] Core Insights - **Cobalt Export Ban**: The DRC has extended its cobalt export ban until October 15, 2025, which will be followed by export quotas [2][8] - **Global Production Impact**: The DRC accounted for over 70% of global cobalt production in 2024. The new quotas are expected to lead to a significant supply decline in 2026-27 [2][8] - **CMOC Sales Projections**: CMOC sold 109,000 tons (kt) of cobalt in 2024 and 46kt in the first half of 2025. Assuming a quota similar to the national level, CMOC could sell approximately 8.6kt in Q4 2025 and around 43.6kt in 2026-27 [2][8] - **Nickel Smelters' Advantage**: Nickel smelters in Indonesia using laterite nickel ore and the High Pressure Acid Leach (HPAL) method can obtain about 10% cobalt as a byproduct. This is expected to benefit them from potential cobalt price increases [3][8] - **Production Estimates**: Huayou's cobalt production from its Indonesian smelting operations is estimated to be around 20kt in 2025 (11kt attributable), while GEM's production is estimated at 12kt (6kt attributable) [3][8] Additional Important Information - **Export Quota Details**: The maximum export amount is set at 18,125 tons for 2025, with a breakdown of 3,625 tons for October and 7,250 tons for both November and December. For 2026-27, the maximum export amount is projected to be 96.6kt, which is about 40% of normal production levels [8] - **Quota Distribution**: Quotas will be allocated to companies based on historical export volumes, excluding those that exported less than 100 tons in 2024 or whose cobalt resources have been depleted [8] Industry Rating - **Overall Industry View**: The Greater China Materials sector is rated as Attractive, indicating a positive outlook for the industry over the next 12-18 months [5]