Basic Materials - China (H/A): Copper top pick; lower aluminum & lithium 2027 prices yet valuation attractive

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Basic Materials - China (H/A): Copper top pick; lower aluminum & lithium 2027 prices yet valuation attractive

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Basic Materials - China (H/A)

Copper top pick; lower aluminum & lithium

2027 prices yet valuation attractive

Rating Change

We lower 2026-27 gold, aluminum, and lithium prices to factor in a stronger USD, risk of 08 July 2026

rate hike and weaker global manufacturing demand; while keeping copper largely Equity

unchanged at US$12.9k/t in FY26 and US$15.2k/t in FY27 on strong electrification China

demand. In HK/ China, we lower all metals and steel earnings, POs and downgrade Basic Materials

Dynanonic to Neutral from Buy (see Exhibi1 and 3 for more details) to reflect the new

prices. Top pick copper on the tightness. We are less positive in lithium and aluminium Matty Zhao >>

Research Analyst

for 2027 with YoY price dropped but we think recent share price correction overdone. Merrill Lynch (Hong Kong)

+852 3508 4001

Copper: deficit in 2H26-2027E, remains most preferred matty.zhao@bofa.com

We expect copper market to be in deficit through 2026-27 on resilient power-driven Miriam Chan, CFA >> Research Analyst

demand (power accounts for >50% of China copper demand) and ongoing mine supply Merrill Lynch (Hong Kong)

constraints. China copper firms are trading at 7-9x FY27E PER, largely underperformed +852 3508 7478 miriam.chan@bofa.com

global peers at 13-23x and copper prices. We reiterate our Buy on Zijin Mining (GP split: See Team Page for List of Analysts

44% gold, 40% copper, and 5% lithium), at 8x 2027E PER, and strong lithium/copper

volume growth; JXC (9x FY27E PER, with copper foil listing catalyst); MMG (highest

copper beta, 7x FY27E P/E); and CMOC (likely easing of sulfur cost pressure). Exhibit 1: Stock changes summary