3Q earnings beat estimates on investment gainsJiangxi Copper released its 3Q16 results showing bottom line earnings ofRMB515mn, indicating a significant increase of 89%QoQ and 55%YoY andrepresenting 47% and 48% of DBe and consensus respectively. The betterresults this quarter is mainly attributable to the RMB362mn of investment gainduring the reporting period from commodity futures. Maintain Hold.
　　Financials – stable operating matrix; but less cashflowQoQ perspective, JXC's topline and GPM declined 2% and 2ppt, despiteslightly higher copper price during 3Q16. Its SG&A % of total revenue alsodropped 0.2ppt to 1% （vs. DBe 1.3%）。 On the other hand, operating cash flowand investing cashflow declined substantially by 81%YoY and 128%YoY in 3Q,respectively, as a result of higher AR, prepaid and less cash from investments.
　　Industry outlook; maintain Hold
　　Within metals sector, we expect copper continue to be relatively weaker withconcentrate supply peaking this year and refinery supply peaking next year,according to DB global commodity. We maintain Hold on Jiangxi Copper withTP of HKD9.3. Our TP is based on DCF life-of-mine methodology where weassume 9.6% WACC. JXC is currently trading at 26x PE and 0.6x PB. Risksinclude significant increase/decrease in copper price, and higher-/lower-thanexpectedproduction costs.