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1、,%Up/dow n,Price,January 25,2013China:Metals higher prices and TC/RC boost earnings,Global industrial recovery to spur demand growth in 2013.Our GlobalECS Team estimates 2013 global economic growth of 3.3%(3.1%in 2012).,OUR NEW TARGET PRICES AND RATINGSCompany Ticker Rating 12M TP,We expect growth i
2、n Chinas property market in 2013 will increase copperdemand in downstream industries like home appliances,and overseas,JXC(A)Zijin(A)Zhongjin Gold,600362.SS601899.SS600489.SS,BuyBuyBuy,29.304.4018.70,18.7%14.0%11.8%,demand(US property and emerging markets)will boost global copperdemand.We see 2013 g
3、lobal/China copper demand growth of 3.8%7%.,Shandong GoldTonglingChalco(A),600547.SS Neutral000630.SZ Neutral601600.SS Sell,39.2916.513.30,2.3%-13.0%-36.9%,Yunnan Copper,000878.SZ,Sell,8.30,-45.4%,Demand growth and loose monetary policy will drive higher copper,prices in 2013.In addition to demand g
4、rowth,we believe looser monetarypolicy worldwide will be a factor supporting higher 2013 copper prices.Weestimate copper prices will rise 6.3%in 2013 to US$8,458/t.However,ourGlobal Commodity Team expects copper prices will fall to US$7,250/t in2014 due to additional supply coming on stream and a dr
5、op in demand.,Note:Target prices are in Rmb.*indicates the stock is onour regional Conviction List.Share prices as of January 21,2013.12-m TPs based on EV/GCI vs.CROCI/WACC(Directors Cut).Downside risks:Lower-than-expectedcopper prices.Upside risks:Large-scale economic stimulusfrom the Chinese gover
6、nment.Source:DataStream,Gao Hua Securities Research estimatesKEY GS/GH 2013 COPPER A-SHARE ESTIMATES,TC/RC recovery and a narrower Shanghai-London price spread willbenefit copper company earnings.Refining is a significant portion of,Net profitgrow th,Copperconcentrateself-supplied,PE,PB,ROE,Chinese
7、copper firms revenues.We think refining earnings will be benefitfrom a recovery in copper TC/RC fees and a narrower SH-LME price spread.,TonglingJXC(A)Yunnan Copper,43%22%150%,5%20%15%,20.413.8,2.21.83.1,12%14%1.5%,JXC(A)up to Buy;Tongling at Neutral,Yunnan Copper at SellJiangxi Copper is our top on
8、shore copper pick due to its:1)leading selfsufficiency in copper concentrate,and 2)competitive mine copperproduction costs.This should leave JXC(A)best positioned to benefit fromthe strong copper pricing outlook in 2013.We upgrade JXC(A)to Buy fromNeutral with a Directors Cut-based 12-m target price
9、 of Rmb29.30(19%upside).For more details on JXC(A),please see Post-holiday restocking todrive further rally;favor cement,copper,published on January 25,2013.Tongling:Main beneficiary of 2013 TC/RC rise.In addition to highercopper prices,Tonglings higher imported copper concentrate percentagemeans it
10、 will benefit more from higher TC/RC fees and a narrower SH-LMEprice spread.We resume coverage of Tongling with a Neutral rating and aDirectors Cut-based 12-m target price of Rmb16.51(13%downside).Yunnan Copper:Little room for earnings growth.The firm saw losses in1Q-3Q12,and we see cost pressures c
11、ontinuing through 2014,makingearnings improvements unlikely.We resume coverage of Yunnan with aSell rating and a Directors Cut target price of Rmb8.30(45.4%downside).,Source:Gao Hua Securities Research estimates.RELATED RESEARCHChina:Metals supplydivergence still a key,December 4,2012Metal Detector:
12、Base metals outlook:Copper remains attractive,nickel to underperform,October 15,2012,Jefferson Zhang+86(21)2401-8945 Beijing Gao Hua Securities Company LimitedJulian Zhu+852-2978-7367 Goldman Sachs(Asia)L.L.C.Yi Zhu+852-2978-1370 Goldman Sachs(Asia)L.L.C.The Goldman Sachs Group,Inc.,Goldman Sachs do
13、es and seeks to do business withcompanies covered in its research reports.As a result,investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report.Investorsshould consider this report as only a single factor in makingtheir investment decisio
14、n.For Reg AC certification and otherimportant disclosures,see the Disclosure Appendix,or go Analysts employed by non-US affiliates are not registered/qualified as research analystswith FINRA in the U.S.Global Investment Research,4,5,10,13,19,21,23,30,2,January 25,2013Table of contentsOverview:We are
15、 optimistic about copper in 2013,Buy JXC(A)Demand recovery and QE to support copper prices in 2013Chinas copper industry in 2013:Refining to play bigger roleA-share copper firms:Jiangxi Copper has stable fundamentalsUsing Directors Cut to compare non-ferrous metal valuationsJiangxi Copper(600362.SS)
16、:The best onshore copper play;BuyYunnan Copper(000878.SZ,Sell):Short-term improvement unlikelyTongling(000630.SZ,Neutral):Higher 2013 TC/RC to drive earningsDisclosure AppendixAll prices mentioned in this report are as of market close January 21,2013.Goldman Sachs Global Investment Research,China:Me
17、tals&Mining:Base Metals38,3,January 25,2013Exhibit 1:Valuation summary for global non-ferrous metals stocks under GS/GH coverage,China:Metals&Mining:Base Metals,GS/GH,21-Jan-13,EPS,P/E(X),P/B(X),EV/EBITDA(X),ROE,Ticker,Rating,Price,Ccy,12M TP,2012E,2013E,2012E 2013E 2012E 2013E,2012E,2013E,2012E,201
18、3E,China-A share,Zijin Mining(A)Zhongjin GoldJiangxi Copper(A)Tongling Non-ferrousShandong GoldYunnan CopperChalco(A),601899.SS600489.SS600362.SS000630.SZ600547.SS000878.SZ601600.SS,BuyBuyBuyNeutralNeutralSellSell,3.8616.7224.6818.9938.4215.205.23,CNYCNYCNYCNYCNYCNYCNY,4.4018.7029.3016.5139.298.303.
19、30,0.230.591.460.651.640.03(0.40),0.300.751.790.931.990.07(0.16),16.528.416.929.123.4,13.022.313.820.419.3,3.04.82.02.57.03.11.5,2.54.01.82.25.33.11.6,8.812.612.215.213.418.851.3,7.110.19.811.511.116.919.7,19%18%12%9%35%1%-11%,21%20%14%12%31%1%-5%,Median-A share metals companies,23.4,19.3,3.0,2.5,13
20、.4,11.1,12%,14%,HK-H share,Jiangxi Copper(H)Zijin Mining(H)Zhaojin Mining(H)China MolybdenumChalco(H),0358.HK2899.HK1818.HK3993.HK2600.HK,Buy*BuyNeutralNeutralSell,21.653.1612.064.183.96,HKDHKDHKDHKDHKD,26.403.6012.803.912.40,1.460.230.620.23(0.40),1.790.300.760.23(0.16),11.910.815.614.8,9.78.512.71
21、4.3,1.41.93.61.40.9,1.31.73.11.31.0,8.96.19.89.042.3,6.94.97.97.916.3,12%19%25%10%-11%,14%21%26%9%-5%,Median-H share metals companies,13.4,11.2,1.4,1.3,9.0,7.9,12%,14%,US,Vale,VALE,Buy,20.02,USD,29.30,1.12,2.50,17.8,8.0,1.4,1.3,8.4,4.9,8%,16%,Freeport-McMoRan Copper&GoFCX,Neutral,33.64,USD,38.00,3.0
22、6,5.15,11.0,6.5,1.8,1.4,5.1,3.2,18%,24%,AlcoaSouthern Copper Corp.,AASCCO,NeutralNeutral,9.0041.26,USDUSD,10.0037.00,0.232.68,0.502.15,38.315.4,18.219.2,0.76.9,0.76.1,8.59.6,7.111.4,2%50%,4%34%,Median-US metals companies,16.6,13.1,1.6,1.3,8.4,6.0,13%,20%,Australia,OceanaGold,OGC.AX,Buy*,2.77,AUD,4.4
23、0,0.05,0.44,61.9,6.7,1.3,1.2,7.6,3.0,2%,19%,Lynas,LYC.AX,Buy,0.63,AUD,0.82,(0.05),(0.04),1.9,1.8,-15%,-13%,Teranga GoldAluminaAlacer GoldIluka Resources,TGZ.AXAWC.AXAQG.AXILU.AX,NeutralSellNeutralSell,2.141.124.519.70,AUDAUDAUDAUD,1.790.823.937.83,0.26(0.02)0.330.90,0.16(0.04)0.440.58,8.714.410.8,13
24、.710.816.9,1.71.10.92.6,1.51.10.82.5,4.621.24.05.6,5.229.83.27.9,16%-2%9%24%,12%-4%8%15%,Median-Australian metals companies,10.8,13.7,1.7,1.5,5.1,6.6,9%,8%,*Indicates the stock is on our regional Conviction Buy/Sell list.Target prices of US stocks are based on a 6-month timeframe.Source:Datastream,G
25、oldman Sachs Research estimates,Gao Hua Securities Research estimates.Goldman Sachs Global Investment Research,4,January 25,2013,China:Metals&Mining:Base Metals,Overview:We are optimistic about copper in 2013,Buy JXC(A)Copper prices,TC/RC to drive copper earnings in 2013Global industrial recovery to
26、 spur demand growth in 2013.Our Global ECS Teamestimates 2013 global economic growth of 3.3%(3.1%in 2012).We expect growth inChinas property market in 2013 will increase copper demand in downstream industries likehome appliances,and overseas demand(US property and emerging markets)will boostglobal c
27、opper demand.However,copper supply growth should accelerate beyond trendlevels in 2013.We see 2013 global copper demand growth of 3.8%,which is still higherthan the supply growth of 2.8%.We estimate copper prices will rise 6.3%to US$8458/t in 2013.In addition to demandgrowth,we believe looser moneta
28、ry policy worldwide will be a factor supporting higher2013 copper prices.We estimate copper prices will rise 6.3%in 2013 to US$8,458/t.However,our Global Commodity Team expects copper prices will fall to US$7,250/t in 2014due to additional supply coming on stream and a drop in demand.TC/RC recovery
29、and a narrower Shanghai-London price spread will benefit coppercompany earnings.Refining is a significant portion of Chinese copper firms revenues.Abundant supply in 2013 and 2014 is likely to cause TC/RC to increase.We expect 2013TC/RC will rise 10.2%to US$70/t and US$0.07/lb from US$63.5/t and US$
30、0.06/lb.We alsobelieve the Shanghai/London Price Spread is likely to shrink in 2013,as China copperdemand(7%)is much higher than global demand of 3.8%.Therefore,2013 refiningearnings should benefit from a recovery in copper TC/RC fees and a narrower SH-LMEprice spread.In this report,compare three A-
31、share copper companies,and we still favor strongfundamentals.JXC(A)is our top pick;we resume coverage of Tongling at Neutraland Yunnan Copper at Sell.JXC(A):Buy The best onshore copper play.We prefer Jiangxi Copper over TonglingCopper and Yunnan Copper due to:1)its leading self sufficiency in copper
32、 concentratesand 2)its lowest mine copper production costs as a result of its open pit mines.This shouldleave Jiangxi Copper best positioned to benefit from the strong copper pricing outlook in2013.We upgrade Jiangxi Copper A to Buy from Neutral with a Directors Cut-based targetprice of RMB29.30,imp
33、lying 19%upside.Downside risk:Over 80%of Jiangxi Coppersrevenue and earnings are driven by the sales of copper and copper products,hence,lower-than-expected copper prices could negatively affect our earnings estimates and valuations.Tongling:Neutral Higher 2013 TC/RC to drive earnings.We resume cove
34、rage onTongling and assign a Neutral rating.Our Directors Cut 12-month target price is Rmb16.51,implying 13%potential downside.Core drivers of growth include:higher TC/RC prices in2013,a narrowing of the Shanghai-London copper price spread and Tonglings newdouble flash refining system for 2013,which
35、 will lower costs.Furthermore,the parentfirm has pledged to inject Chifengguowei Mining upon maturity into the listco,furthersupporting development.Downside risks:The Shanghai-London copper price spreadpersists,harming refining margins;regulators reject the secondary stock offering.Upside:faster-tha
36、n-expected asset injection.Yunnan Copper:Sell Short-term improvement unlikely.We resume coverage ofYunnan Copper with a Sell rating and a Directors Cut-based 12-month target price ofRmb8.30,implying 45.4%downside potential.Yunnan Copper is the copper A-share withthe greatest sensitivity to copper pr
37、ices;the GS global commodities team estimates copperprices will increase further in 2013,which will have a positive effect on earnings.However,Goldman Sachs Global Investment Research,5,January 25,2013,China:Metals&Mining:Base Metals,geological conditions at the firms mines are difficult,and the min
38、es are relatively remote,causing slow turnover and high production costs.Yunnan Coppers CROCI will likelyremain in the third/fourth quartile over the next three years.The company took losses forthe first three quarters of 2012,and we believe it will continue to face rising cost pressuresthrough 2014
39、,making short-term earnings improvement unlikely.Upside risks:Faster-than-expected parent company asset injections.Exhibit 2:Comparison of our earnings estimates and market consensus for A share copper coverage universeNote:Consensus for Yunnan Copper is not suitable as there is only one broker did
40、the forecast.,GS/GH estimated earning,Consensus,GS/GH estimated EPS,Consensus,Diff.from Cons.,Companies,2012E,2013E,2014E,2012E,2013E,2014E,2012E,2013E,2014E,2012E,2013E,2014E,2012E,2013E,2014E,Mn Rmb,M n Rmb,Rmb,Rmb,%,Jiangxi CopperTonglingYunnan Copper,5,05292742,6,1851,323104,5,2081,36594,5,12591
41、0-184,5,7701,308170,6,2181,692241,1.460.650.03,1.790.930.07,1.500.960.07,1.480.64-0.13,1.670.920.12,1.801.190.17,-1%2%,7%1%-39%,-16%-19%-61%,Source:Wind,Gao Hua Securities Research estimates.Demand recovery and QE to support copper prices in 2013Demand:Global industrial recovery in 2013 to drive cop
42、per demandThe GS ECS Team estimates global GDP growth will increase from 3.1%in 2012 to 3.3%in2013.The team further forecasts sharp improvement in emerging economies(China,India,Brazil,Russia),expecting GDP growth to rise to 6.1%from 5.5%in 2012.Our GS GlobalLeading Indicator shifted positive in Aug
43、ust and strengthened in the following months.Itindicates that global manufacturing activity should continue to recover over the next fewmonths.,Exhibit 3:Goldman Sachs estimates global GDP growthrecovery in 2013,Exhibit 4:and the GS GLI also indicates a recovery inglobal manufacturing activity,Real
44、GDP,%change 2012USA 2.2Japan 1.7,20131.90.3,Q11.7-0.7,2013Q21.9-0.5,Q31.80.8,Q42.11.7,706560,USPMIEuropePMI,ChinaPMIGSGLI,2.01.51.0,Euro areaFranceGermanyItalySpainUK,-0.40.21-2-1.3-0.1,-0.200.8-0.8-1.71.4,-0.40.10.7-1.5-1.91,-0.30.10.6-0.8-1.91.7,-0.2-0.10.7-0.6-1.81.2,0.1-0.11.1-0.2-1.31.5,5550454
45、035,0.50.0(0.5)(1.0)(1.5),ChinaIndiaBrazilRussiaAdvanced EconomieEmerging M arketsWorld,7.65.41.53.71.25.53,8.16.53.83.81.26.13.3,7.95.73.330.85.62.9,86.54.33.31.16.13.2,8.26.73.93.71.36.33.4,8.26.93.84.81.76.43.7,30(2.0)25(2.5)06/08 12/08 06/09 12/09 06/10 12/10 06/11 12/11 06/12 12/12,Source:GS Gl
46、obal ECS Research estimates.,Source:Bloomberg,GS Global ECS Research estimates.,We believe growing demand from Chinas housing market(increased sales andcompleted buildings)and home appliance market will cause copper demand torebound in 2013.In addition,more mild recoveries in regions outside China(A
47、mericanreal estate,emerging markets)before late 2013 will likely provide support for copperconsumption.The GS Global Commodities Team estimates global copper consumptiongrowth of 3.8%in 2013,with consumption to increase 7%in China.Goldman Sachs Global Investment Research,Mar05,Jun05,Sep05,Dec05,Mar0
48、6,Jun06,Sep06,Dec06,Mar07,Jun07,Sep07,Dec07,Mar08,Jun08,Sep08,Dec08,Mar09,Jun09,Sep09,Dec09,Mar10,Jun10,Sep10,Dec10,Mar11,Jun11,Sep11,Dec11,Mar12,Jun12,Sep12,Dec12,Mar13,Jun13,Sep13,Dec13,Mar14,Jun14,Sep14,Dec14,6,January 25,2013Exhibit 5:GS China Copper Consumption Indicatorshows recovery through 2
49、013,China:Metals&Mining:Base MetalsExhibit 6:US real estate shows signs of recovery(newconstruction sales improving yoy),45%,QEII/ex-China PMIpick up,Europecrisis,11000,40%35%,10500100009500,5045,Thousandsunits,Newhousessales,yoy(Rhs),%,50%40%,30%25%20%15%10%5%0%-5%-10%-15%,9000850080007500700065006
50、000550050004500400035003000,403530252015105,30%20%10%0%10%20%30%40%,China Copper Consumption IndicatorChina Copper Consumption Indicator forecast(base case)Copper mine supply,0,11/10,05/11,11/11,05/12,11/12,50%,Real copper price(rhs),Source:Goldman Sachs Research estimates,Gao Hua Securities Researc
