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].

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]