The company suffered loss of ~Rmb1.04bn in investment income and fair value changes.
Slump of copper price led to ~Rmb1.4bn deficit in high-priced raw material.
Copper smelting business is expected to profit in 2009.
Operational costs will decline to some extent.
Copper is the bellwether of basic metals, and its 2009 average price is above the cash cost.
Supposing that copper price is Rmb30000/ton and Rmb40000/ton respectively in 2009 and 2010, we forecast the company’s 2009-2010E EPS to be Rmb0.537 and Rmb1.108; based on current A-share price of Rmb23.10, 2008 P/B is at 3.36x, which is close to the historic average; besides, current share price is close to our DCF estimation of Rmb21.77.
We hold optimistic view that current share price has investment value in the long term. However, in the short run, its valuation is close to the up-limit; if copper price sees no reverse trend, share price bears great pressure to fall. We maintain “Neutral” rating for the counter. Besides, valuation pressure will release once share price begins to decline, then investors may concern about transaction investment opportunities.