Daily Brief Energy/Materials: China Northern Rare Earth Group High-Tech, Nippon Steel Corporation, John Wood, Crude Oil, Hindustan Zinc, Nippon Denko, Pan African Resources, Chevron Corp, Mitsubishi Steel Mfg, Corcel and more

• With the review period complete, there are 6 non-constituents in direct inclusion zone and 4 current constituents in direct deletion zone. However, as usual, there will be discretion used.
• 4 changes result in a one-way turnover of 4%, leading to a round-trip trade of CNY 17bn (US$2.4bn). Index arb balances will increase the impact on the stocks.
• The index committee has used discretion in selecting the index adds and deletes and that could continue to be the case at this review too.

• Guidance cut (Business Profit ¥500 bn → ¥450 bn) as U.S. Steel delivers no profit contribution, overseas spreads weaken, and one-off losses weigh on earnings; domestic operations remain resilient.
• Integration drag : $11 bn U.S. Steel modernization plan and rigid U.S. labor terms keep margins diluted and free cash flow negative; deleveraging and ROCE recovery deferred to FY27+.
• Valuation rich, patience warranted: Trading at ~19× EV/EBITDA (vs peer median ~10×) with ROCE < 8%; maintain Hold / Underweight until synergy visibility and free-cash-flow inflection emerge post-FY26.

• Two gates cleared: Borrowing-limit and FY24 audit milestones complete; Sidara’s 30 p bid now hinges solely on A&E execution by 31 Dec 2025.
• Market discount persists: At 22 p, shares imply 30–35 % failure probability; downside largely priced, upside to 30 p offers 36 % absolute return.
• Event-Driven focus: Binary risk now procedural, not strategic—spread likely to tighten toward high-20s once A&E documentation confirmed.

• The WTI Crude futures market currently trades with persistent and significant opposing market forces actively holding the price within a defined trading range.
• Long-Term supply/demand bearishness and a strong geopolitical risk premium create a price floor, which could be further supported by recent decisions by OPEC+
• This structural back-and-forth in price action creates a window to execute a strategic options trade monetizing implied volatility levels.

• Hindustan Zinc is one of the world’s largest, lowest-cost, integrated producers of zinc-lead, with a significant and growing silver byproduct business that enhances margins and provides a hedge against zinc price volatility.
• The company is pursuing a major capacity expansion to 2 million tonnes per annum (MTPA), funded by strong internal cash flows, aiming to solidify its cost leadership and capture growing demand, particularly in the Indian market.
• A significant overhang on the stock is the ongoing disagreement between the company’s management (led by majority shareholder Vedanta) and the Government of India (a 29.54% shareholder) regarding a proposed demerger of the zinc and silver assets, creating uncertainty for investors.

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• Cumulative Q3 FY12/25 revenue was JPY57.9bn (+2.5% YoY), with operating profit at JPY3.2bn (-13.6% YoY).
• Domestic Ferroalloys business saw a JPY400mn YoY decline in underlying recurring profit, reaching JPY500mn in cumulative Q3.
• Functional Materials business reported a JPY200mn YoY increase in underlying recurring profit, reaching JPY1.2bn in cumulative Q3.

• Shawbrook (SHAW LN), the biggest UK IPO of the year, is expected to be included in UK 250 and All-Share at a market cap of ~£2bn.
• Pan African Resources (PAF LN) transferred its listing to the Main Market resulting in its anticipated addition to UK 250 and All-Share at a market cap of ~£1.8bn.
• Princes Group (PRN LN) is anticipated to be included in UK 250 and All-Share following its IPO in November at a market cap of ~£1bn.

• Chevron demonstrated strong operational momentum in Q3 2025, with record worldwide production of over 4 million barrels of oil equivalent per day with upside from the Hess integration.
• The stock is trading at a premium valuation with a challenging but achievable growth path in terms of annual growth rates and revenues.
• Given the current valuation and financial outlook, the upcoming Investor Day on November 12, 2025, presents a short-term window to potentially put on a single stock options strategy.

• The company reported revenue of JPY79.9bn, operating profit of JPY2.1bn, and net income of JPY674mn, with varied YoY changes.
• Revenue and operating profit decreased in domestic operations due to lower sales volumes and productivity issues, despite overseas growth.
• Revenue and operating profit increased in precision springs and special alloy powder businesses, driven by higher sales volumes and price adjustments.

• Corcel has received final ministerial approval for the Environmental Impact Assessment, granting full environmental clearance to proceed with seismic acquisition activities within the KON-16 Block.
• The approved licence encompasses both 2D seismic acquisition and future exploration drilling operations.
• The seismic programme is underpinned by £3.85 mm in proceeds from the accelerated exercise of warrants.