China Galaxy Securities released a research report stating that the A-share non-ferrous metals industry maintained high growth in performance during the first half of the year, further establishing the industry's positive trend. Rising expectations of Federal Reserve interest rate cuts are driving global capital to accelerate gold purchases. Combined with uncertainties regarding Fed independence, this may trigger more hedging capital allocation to gold, pushing gold prices higher. The firm recommends focusing on A-share gold leading stocks. Against the backdrop of escalating global trade disputes and geopolitical conflicts, the strategic value of scarce metals has increased. China has strengthened export controls, and the rare earth industry presents a clearer global monopoly pattern. In Q3 2025, overseas restocking demand is expected to boost rare earth magnetic material consumption, stimulating upstream rare earth prices to maintain strong upward momentum. Magnetic materials may also experience both volume and price increases. The firm recommends focusing on rare earth magnetic material leaders.

Gold stock recommendations include: Zhongjin Gold (600489.SH), Shandong Gold (600547.SH), Chifeng Gold (600988.SH), Shandong Gold International (000975.SZ), and Hunan Gold (002155.SZ). Rare earth-related companies to watch include Northern Rare Earth (600111.SH), China Rare Earth (000831.SZ), Jl Mag Rare-Earth (300748.SZ), and Ningbo Yunsheng (600366.SH).

China Galaxy Securities' main viewpoints are as follows:

In the first half of 2025, A-share non-ferrous metals industry performance maintained high growth, further establishing the industry's positive trend. Q2 2025 non-ferrous metals industry overall performance growth rate declined somewhat due to high base effects. After domestic development focus shifted toward stable growth at the end of last year, a series of incremental economic policies introduced and implemented gradually showed effectiveness in the first half of this year, accelerating China's economic recovery momentum. China's GDP growth rate reached 5.3% in the first half of 2025, exceeding market expectations. Combined with liquidity released after the Federal Reserve entered a rate-cutting cycle, this supported non-ferrous metal commodity prices rising compared to the same period last year, consolidating the non-ferrous metals industry's prosperity and the positive trend of non-ferrous metal companies' performance recovery after bottoming out and entering a new upward cycle.

Specifically, the A-share non-ferrous metals industry achieved 6.70% year-over-year revenue growth and 43.88% year-over-year performance growth in the first half of 2025. For Q2 2025 alone, the A-share non-ferrous metals industry recorded 6.03% year-over-year revenue growth and 23.80% year-over-year performance growth.

The overall ROE level of the A-share non-ferrous metals industry continued to rise in Q2 2025, mainly due to improved overall asset turnover ratios. From DuPont analysis results, the overall ROE of the A-share non-ferrous metals industry rose from 2.69% in Q1 2025 to 3.09% in Q2 2025, up 0.40 percentage points quarter-over-quarter. The overall asset turnover ratio of the A-share non-ferrous metals industry improved from 0.25 to 0.28, contributing 0.33 percentage points to ROE growth, making it the core factor for the overall ROE level increase in Q2 2025. Meanwhile, the overall sales profit margin of the A-share non-ferrous metals industry rose from 5.26% in Q1 2025 to 5.29% in Q2 2025, boosting ROE by 0.02 percentage points. Additionally, the overall equity multiplier of the A-share non-ferrous metals industry increased from 2.01 in Q1 2025 to 2.05 in Q2 2025, contributing 0.06 percentage points to ROE improvement.

Industry cash flow conditions continued to improve: The A-share non-ferrous metals industry's overall operating net cash flow grew 22% year-over-year and 211% quarter-over-quarter in Q2 2025. Due to collection cycles and seasonal factors in the non-ferrous metals industry, companies typically see better cash flows in the second quarter compared to the first quarter. However, Q2 2025 industry operating cash flow grew year-over-year compared to Q2 2024, and the A-share non-ferrous metals industry's overall operating net cash flow achieved year-over-year growth for the fourth consecutive quarter, still demonstrating continued improvement in non-ferrous metal companies' cash positions.

Risk warnings: Risk of Federal Reserve rate cuts falling short of expectations; risk of downstream demand for non-ferrous metals not meeting expectations; risk of significant decline in non-ferrous metal prices.