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

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

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Basic Materials - China (H)

Copper top pick; lower aluminum & lithium

2027 prices yet valuation attractive

Price Objective 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 and POs (see Exhibi1 and 3 Basic Materials

for more details) to reflect the new prices. Top pick copper on the tightness. We are less

positive in lithium and aluminium for 2027 with YoY price dropped but we think recent Matty Zhao >>

Research Analyst

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

Please refer to Exhibit 3 for full changes