With a stable demand outlook, a narrowing surplus amid expansioncutbacks by major global copper producers could be driver of highercopper prices in 2017 in our view.
　　With proceeds to be raised from private placement and bondissuance estimated at RMB14-15bn, the company is well capitalisedfor M&As.
　　On the back of higher copper price assumption, we have raised ourFY16/17E earnings by 19.4%/20.7% and revised up our price targetto HKD15.0 （from HKD12.0）， pegging on FY17E 1.0x PBR （prev. 0.8x）。
　　Maintain Buy.
　　Copper prices likely bottomed out in 2016. We see diminishing coppersurplus in 2017, given the decelerating refined production growth assuggested by the better-than-previously-expected annual TC/RC term forthe coming year agreed at the CESCO conference. Global inventories interms of stocks to consumption day will remain tight. Driven bydownstream restocking and rising market appetite, copper inventories atLME and Shanghai Futures Exchange have been decreasing, with the stockto-consumption ratio near historical low. Going forward, we expect to seea prolonged restocking period, in view of the potentially increasinginfrastructure spending in both China and US under Donald Trump'spresidency, with a supply deficit likely to emerge in 2018, in our view.
　　Well capitalised for potential M&As. As already approved by thegovernment, the company's planned private share placement andRMB10bn bond issuance would solidify its net cash position, providing thefinancial leeway for potential M&As.
　　We tune up our net profit forecast for 2016 and 2017. We have raised ournet profit forecast for FY16E and FY17E by 19.4% and 20.7% respectively,on assumption that copper prices will reach RMB37,500/ton in FY16E andRMB41,000/ton in FY17E, which is equivalent to USD4,600/ton andUSD5,100/ton respectively, based on the current USD to RMB exchangerate of 6.89. Despite Jiangxi Copper's earnings reached a trough in 2015,we maintain our view that ROE would pick up gradually in 2017.
　　Valuation remains undemanding. We have maintained the PBR multiplesin valuing Jiangxi Copper. The company is currently trading at anundemanding valuation of 0.8x FY17F PBR, relative to the global peers'
　　average of 1.4x and its historical average of 1.06x PBR between 2011 and2016. Thus, on the back of an enhanced copper price outlook, we believeits valuation is poised for a further re-rating in the mid-term. Pegging to1.0x FY17F PBR, we raise our price target to HKD15.0, thus reiterate BUY