HUAYOU COBALT(SH:603799)2025-10-21 13:32Summary 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]