China Galaxy Securities: The positive trend in the non-ferrous metal industry is further solidifying, focusing on leading stocks in rare earths and gold
China Galaxy Securities released a research report indicating that the A-share non-ferrous metal industry will maintain high growth in the first half of 2025, further consolidating the positive trend in the industry. The expectation of interest rate cuts by the Federal Reserve is driving global funds to accelerate the purchase of gold, suggesting attention to leading gold stocks. Meanwhile, under the global monopoly pattern in the rare earth industry, it is expected that rare earth prices will continue to rise strongly, recommending attention to leading rare earth magnetic material companies. In the first half of 2025, the A-share non-ferrous metal industry is expected to see a year-on-year revenue growth of 6.70% and a year-on-year performance growth of 43.88%
According to the Zhitong Finance APP, China Galaxy Securities has released a research report stating that the performance of the A-share non-ferrous metal industry maintained high growth in the first half of the year, further establishing a positive trend for the industry. The expectation of an interest rate cut by the Federal Reserve is rising, driving global funds to accelerate the purchase of gold; combined with the unclear independence of the Federal Reserve, this may trigger more risk-averse funds to allocate to gold, pushing up gold prices. It is recommended to pay attention to leading gold stocks in the A-share market. In the context of escalating global trade disputes and geopolitical conflicts, the strategic value of scarce metals is increasing. China is strengthening export controls, and the rare earth industry is showing a clearer global monopoly pattern. The demand for overseas restocking in Q3 2025 will boost the consumption of rare earth magnetic materials, stimulating upstream rare earth prices to maintain a strong upward trend, and magnetic materials may also see both volume and price increases. It is recommended to focus on leading rare earth magnetic material companies.
Gold stocks to watch: Zhongjin Gold (600489.SH), Shandong Gold (600547.SH), Chifeng Gold (600988.SH), Shanjin International (000975.SZ), Hunan Gold (002155.SZ). Rare earth-related companies to watch include Northern Rare Earth (600111.SH), China Rare Earth (000831.SZ), Jinli Permanent Magnet (300748.SZ), and Ningbo Yunsheng (600366.SH).
The main viewpoints of China Galaxy Securities are as follows:
In the first half of 2025, the performance of the A-share non-ferrous metal industry maintained high growth, further establishing a positive trend for the industry. In Q2 2025, the overall performance growth rate of the non-ferrous metal industry declined due to a high base effect: after the domestic development focus shifted to stabilizing growth at the end of last year, a series of incremental economic policies were introduced and gradually showed effectiveness in the first half of this year, accelerating the momentum of economic recovery in China. The GDP growth rate in the first half of 2025 reached 5.3%, exceeding market expectations. Coupled with the liquidity released after the Federal Reserve entered a rate-cutting cycle, this supported the prices of non-ferrous metal commodities to rise compared to the same period last year, consolidating the prosperity of the non-ferrous metal industry and the recovery of non-ferrous metal companies' performance, entering a new upward cycle. Specifically, the A-share non-ferrous metal industry saw a year-on-year revenue growth of 6.70% in the first half of 2025, with a year-on-year performance growth of 43.88%; in Q2 2025, the A-share non-ferrous metal industry recorded a single-quarter revenue growth of 6.03% year-on-year, with a year-on-year performance growth of 23.80%.
In Q2 2025, the overall ROE level of the A-share non-ferrous metal industry continued to rise, mainly due to the improvement in the overall asset turnover rate of the industry: according to the results of the DuPont analysis, the overall ROE of the A-share non-ferrous metal industry increased from 2.69% in Q1 2025 to 3.09% in Q2 2025, an increase of 0.40 percentage points quarter-on-quarter. Among them, the overall asset turnover rate of the A-share non-ferrous metal industry increased from 0.25 to 0.28, contributing 0.33 percentage points to the ROE increase, which is the core factor for the overall ROE level rise in the non-ferrous metal industry in Q2 2025. Additionally, the overall sales profit margin of the A-share non-ferrous metal industry rose from 5.26% in Q1 2025 to 5.29% in Q2 2025, contributing 0.02 percentage points to the ROE level. Furthermore, the overall equity multiplier of the A-share non-ferrous metal industry increased from 2.01 in Q1 2025 to 2.05 in Q2 2025, contributing 0.06 percentage points to the ROE level The cash flow situation in the industry continues to improve: The overall operating net cash flow of the A-share non-ferrous metal industry grew by 22% year-on-year and 211% quarter-on-quarter in Q2 2025. Due to the collection cycle and seasonal factors in the non-ferrous metal industry, cash flow for non-ferrous metal companies in the second quarter is often better than in the first quarter. However, the operating cash flow of the industry in Q2 2025 increased year-on-year compared to Q2 2024, and the overall operating net cash flow of the A-share non-ferrous metal industry has achieved year-on-year growth for the fourth consecutive quarter, still indicating a continuous improvement in the cash situation of non-ferrous metal companies.
Risk Warning: The risk of the Federal Reserve's interest rate cuts being lower than expected; the risk of downstream demand for non-ferrous metals being weaker than expected; the risk of a significant decline in non-ferrous metal prices
