Zhaojin Mining (1818 HK): Hold: Delayed recovery, lower expectations

Zhaojin's weak 3Q26 results appear fully priced in; the primary valuation drivers are the 2027 production recovery trajectory and gold price volatility. We maintain our Hold rating with a lower TP of HKD16.50 (from HKD17.60). Zhaojin's share price rose 4.5% the day after its 3Q26 results (16 October), outperforming the HSI's 0.5% gain, suggesting investors have already discounted the poor results and are focusing more on macro trends. 3Q self-produced gold output of 1.3t (-71% q-o-q) fell significantly short of expectations; we expect a material downward revision in consensus estimates, though the market appears to prioritise 2027 earnings over 2026. We cut our 2026/27 revenue forecasts by 11%/6% and our 2026 margin forecast by 4ppt, leading to 23%/6% cuts to 2026/27 earnings. Our base case assumes a full production recovery by 1Q27, in line with consensus;