Be prepared for both possibilities.
According to Zhitong Finance APP, Zhongtai has released a Research Report stating a two-pronged approach, being Bullish on investment opportunities in Precious Metals & Rare Earth / Permanent Magnet sectors. 1) Precious Metals, with the weak USA economy, the real yield of ten-year US Treasuries is at a high range not seen in the past decade, and the reconstruction of the dollar credit system has become a trend, so the long-term bullish logic for Gold remains unchanged. 2) Rare Earth / Permanent Magnet, prices are at a historical low in a long cycle, and after the implementation of export controls, the price gap between domestic and foreign markets has significantly widened, highlighting the strategic value of rare earths, with subsequent domestic Indicators expected to gradually materialize, indicating a clear upward price trend.
The main points of Zhongtai are as follows:
In 2024, there will be profit differentiation within the Sector, with Gold, Copper, and Aluminum sectors performing better.
1) Market Review: In 2024, the Nonferrous Metals Sector increased by 3.2%, underperforming the CSI 300 Index by 11.5 percentage points. In terms of sub-sectors, Industrial Metals and Precious Metals increased by 12.2% and 8.5% respectively, showing prominent performance; in terms of commodity prices, Gold, Silver, Antimony ingot, Aluminum oxide, Germanium, Copper, and others ranked high in price increases, while prices of Energy Metals such as Lithium carbonate, Cobalt, Nickel, and Rare Earth weakened. 2) Financial Performance: There is profit differentiation within the Sector, with net income for Gold, Copper, and Aluminum increasing by 52%, 40%, and 27% year-on-year, respectively, and within the electrolytic aluminum sector, internal companies showed differentiated profit capability due to varying self-sufficiency rates of Aluminum oxide; Energy Metals profitability weakened, with net income for Lithium, Rare Earth, and Permanent Magnet segments decreasing by 104%, 67%, and 30% year-on-year.
In Q1 2025, profitability in the Gold and Industrial Metals sectors continues to improve, while profitability in Energy Metals is bottoming out.
1) Market Review: In Q1 2025, the Nonferrous Metals Sector increased by 12.0%, outperforming the CSI 300 Index by 13.2 percentage points. Within sub-sectors, Precious Metals increased by 25.5%, Industrial Metals by 13.3%, Small Metals by 6.7%, and Energy Metals by 5.0%; in terms of commodity prices, Gold, Copper, Tin, and Antimony ingot showed significant increases, while Energy Metals prices are bottoming out, with Cobalt prices significantly rising due to the Democratic Republic of the Congo's suspension of cobalt exports for four months. 2) Financial Performance: Net income for Gold, Copper, and Aluminum sectors increased year-on-year by 47%, 50%, and 29% respectively, with companies within the electrolytic aluminum sector with low self-sufficiency rates for Aluminum oxide showing substantial improvement; Energy Metals profitability is bottoming out, with net income for Lithium, Rare Earth, and Permanent Magnet sectors increasing year-on-year by 159%, 221%, and 107%.
Institution Hold Positions: In Q1 2025, increased allocation in Precious Metals and Industrial Metals.
In Q1 2025, the fund allocation ratio for the Nonferrous Metals Sector was 4.34%, a sequential increase of 1.50 percentage points, and an overweight of 1.57 percentage points. In terms of sub-sectors, public funds significantly increased allocation in Industrial Metals and Precious Metals, with the Industrial Metals Sector increasing by 1.18 percentage points and Precious Metals by 0.35 percentage points; the top 10 stocks with increased allocations are Zijin Mining Group (601899.SH), SD GOLD (600547.SH), Chifeng Jilong Gold Mining (600988.SH), Yunnan Aluminium, Shanjin International, Hunan Gold Corporation, Henan Zhongfu Industrial, CMOC Group Limited, Zhejiang Huayou Cobalt, and Anhui Truchum Advanced Materials and Technology.
Risk Warning: There are risks of commodity price decline, demand being below expectations, supply-side excess release risk, information lag or untimely updates in public data used in research reports, potential risks in industry size estimation based on certain assumptions that may fall short of expectations, and more.
