China Molybdenum :Still far away from a strong recovery
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- Category: Molybdenum's News
- Published on 14 March 2013
- Hits: 478
China Moly reported 3Q12 net profit at RMB209mn, which represents a 30.4%YoY decline and a 54.4% QoQ drop, mainly thanks to the very weak moly priceand softening tungsten price since 2012. Gross margin contracted to 21.4% in3Q12 from 28.1% in 3Q11 and 31.8% in 2Q12. The result report does not provide more detail about sales volume and ASPs.
The global moly industry is facing a structural problem in the next fewyears, given the large slowdown in steel production growth and strong growth inmine production. The moly price saw a short-lived rebound in August and September, possibly due to restocking, but it weakened again from October.
Although we believe there is limited downside for the Moly price, due to production cost support, we don’t expect a large price rebound in the short term,as there are no signs of a very strong demand recovery going forward.
We maintain our Underperform rating for China Moly and our PO of HK$3.3 unchanged, based on a DCF valuation method. Key upside risks are a stronger than-expected China and global economic reovery and more-than-expected newmine delays or cancellations. Company is faster-than-expected development in the Shangfanggou and East Gobi moly mines will provide more upside surprises.
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