The bank assigned a 'Buy' rating to Aluminum Corporation of China (02600), China Hongqiao (01378), and Zijin Mining (02899), and also expressed optimism about pure copper companies.
According to Zhitong Finance APP, Citi issued a research report stating that commodity prices have risen significantly and appear to be consolidating at higher levels. The bank analyzed the impact on various sectors in mainland China. Positively, the basic materials sector is a key beneficiary, especially aluminum, copper, and lithium suppliers. The bank assigned a 'Buy' rating to Aluminum Corporation of China (02600), China Hongqiao (01378), and Zijin Mining (02899), and also expressed optimism about pure copper companies such as Minmetals Resources (01208), Luoyang Molybdenum (03993), and Jiangxi Copper (00358). Additionally, gold jewelers will benefit from rising gold prices, and rising copper prices will expand the gross margins of copper-clad laminate (CCL) producers like Kingboard Laminates (01888).
Negatively, automakers will face pressure due to rising Bill-of-Materials costs. The bank estimates that BEV and PHEV unit costs for mass-market vehicles will increase by approximately RMB 6,565 and RMB 4,310, respectively. In the industry, XPeng Motors-W (09868) and Guangzhou Automobile Group (02238) are more vulnerable due to their smaller scale and lower average selling price; conversely, BYD (01211) and Geely Auto (00175), with larger scales, have the ability to pass over 50% of cost increases upstream to suppliers.
Additionally, the bank expects second-tier companies in the battery industry to face short-term pressures, but CATL (03750), with strong bargaining power, and its Jiangxi lithium mica mine expected to resume operations in Q2 this year, is more defensive compared to peers. The bank believes that energy storage system sales will see margin compression, especially in Q2 this year, marking the start of a 90-day negative catalyst watch for the industry. In the solar industry, module manufacturers are more susceptible to rising silver costs, which account for about 30% of their production costs, potentially squeezing their profit margins. Among China's power grid equipment manufacturers, Pinggao Electric (600312.SH) is most sensitive to rising copper and aluminum costs.
