MMG Limited delivered strong performance in 4Q24 with total copper and zinc output surging 11% QoQ and 38% QoQ respectively. As expansion projects ramp up production and acquired mine shows full year contribution, the company looks at 24% YoY growth in copper output in 2025 based on the mid-point of its guidance. Although we cut our 2024 and 2025 earnings forecasts partly owing to the higher-than- expected cost implied by its guidance, we still expect the company’s earnings to triple in 2025 as the company enters harvest time. We reiterate our BUY call with target price lifted to HK$4.12.
　　Key Factors for Rating
　　In 4Q24, MMG’s copper output grew 11% QoQ to 127k tonnes as the copper output at Las Bambas in 4Q24 reached the best quarterly record since 2019 on the ramp-up at Chalcobamba pit. Its zinc output surged 38% QoQ to 63.9k tonnes mainly on the strong performance at Dugald River as production recovered after sorting out the equipment problem. For full-year 2024, the company’s copper output and zinc output grew 15% YoY and 8% YoY respectively.
　　The company guides for total copper output of 466-522k tonnes in 2025, up 17- 31% YoY. This is possibly the fastest growth among the bigger copper producers in the world. The contributions from the expansion projects in Las Bambas and Kinsevere and the full-year contribution from Khoemacau acquired mid-2024 will be growth drivers. The company also expects its zinc output to reach 214-240k tonnes in 2025, -2% YoY to +9% YoY.
　　In terms of C1 cost, the company’s performance was mixed in 2024 with three mines below our forecasts and two above our forecasts. However, the company guides for higher costs for 2025 at the three mines outperformed in 2024. In particular, the C1 cost at Las Bambas is expected to increase from US$1.51/lb in 2024 to US$1.5-1.7/lb in 2025 on higher staff cost, including one-time payment, reduced capitalised cost and increased social programme spending. We expect about US$0.06/lb is one-off in 2025.
　　Key Risks for Rating
　　Sharp fall in metal prices.
　　Unexpected operational problem at Las Bambas.
　　Valuation
　　We increase our DCF-based target price from HK$3.94 to HK$4.12. Despite the cuts in our forecasts for 2024 and 2025, we are actually looking at higher free cashflow from 2025 onwards. We also roll over the base year from 2024 to 2025 this time.