2018 results in line with preannouncement
JXC’s 2018 revenue rose 5.0% YoY to Rmb215bn and attributable netprofit grew 52% YoY to Rmb2.45bn or Rmb0.71/sh. Recurringattributable net profit tumbled 43% YoY to Rmb1.36bn. 4Q18revenue climbed 6.0% YoY to Rmb52.7bn and attributable net profittopped Rmb402mn, +1,512% YoY and -47.5% QoQ.
LME average copper price rose 5.7% YoY to US$6,527/t in 2018, andwas US$6,164/t in 4Q18 （-10% YoY and +0.6% QoQ）。 Output ofcopper concentrate was 208.3kt in 2018 （-0.6% YoY） and 106.5kt in2H18 （+1.5% YoY and +4.6% QoQ）。 Asset impairment loss narrowed21% YoY to Rmb1.85bn in 2018. R&D spending rose 17.7% YoY orRmb440mn in 2018, while financial expense increased 55% YoY orRmb290mn YoY. Operating cash flow improved 150% YoY toRmb8.2bn. Investment income and fair value gains grew Rmb1.73bnYoY to Rmb1.25bn. Proven copper reserve had totaled 9.36mntonnes as of end-2018 （100% equity）。
Trends to watch
JXC guides copper output at 205.8kt in 2019, and capex at Rmb2.66bn（excl. equity investment）。
We see price support for copper in 2019, given limited incrementaloutput and possible 10–20% YoY increase in power grid investment inChina. In addition, China’s tightening regulations on scrap copperimports should drive an over 10% increase in the import of copperconcentrate. Copper inventory is also low at home and abroad.
Earnings forecast
Given the change in our copper price assumption, we cut 2019e EPSforecast 21% to Rmb0.72 and introduce 2020e forecast of Rmb0.82.
Valuation and recommendation
JXC-A is trading at 21.4x 2019e and 18.8x 2020e P/E, and JXC-H at13.1x and 11.4x P/E. Maintain BUY and TPs of Rmb17 （23.8x 2019eand 20.8x 2020e P/E） and HK$11 （13.6x 2019e and 11.9x 2020e P/E），implying 11% and 4% upside.
Risks
Disappointing downstream demand and/or copper prices