The uranium market is quietly changing beneath the surface - violently too. In this report, we review the full nuclear fuel cycle dynamics and assess their potential impacts on uranium S/D dynamics in 2025 and onwards. We are becoming more positive on uranium pricing in light of increasing demand from NA/EU enrichment overfeeding, inventory replenishment prospects and global NPP new starts. With a tight supply, any major production disruptions could drive uranium price to historical high level, in our view. We update CGNM’s 2026 earnings with new uranium price and pricing formula assumptions. Lifting TP to HK$2.40 based on SOTP valuation method, implying 10x 2026E P/E. We reiterate CGNM as our sector top pick for 2025.
　　Key Factors for Rating
　　Combing through the nuclear fuel cycle. Most natural uranium needs to be converted into uranium hexafluoride (UF6 or “hex”) before being enriched to 3-5% level for nuclear fuel fabrication. As most of the conversion and enrichment companies are unlisted, their dynamics are less known to the investor community. The global conversion and enrichment capacities are estimated to be 62,000tU and 61,500tSWU respectively. Compared with uranium mining, there are even less players in these two segments due to their sensitivities.
　　Further bifurcation since the enriched uranium ban. Out of most equity investors’ sight, conversion and enrichment prices have been rising rapidly since 2022. The situation was exacerbated by US’ and Russia’s mutual bans on enriched uranium trading in May and Nov 2024 respectively. To partly replace Russian SWU imports with western ones, we estimate tail assay will have to be lifted by 0.065ppt, which will generate an extra uranium demand of c.2,240tU.
　　Additionally, US utilities may have to replenish their inventories in 2025 due to the under-contracting in 2024 and higher-than-expected demand from 2026 onwards, which is driven by strong power demand from datacentres. Together, these factors will boost uranium price over the last pinnacle in 2007 once the new US administration sorts out import tariffs, in our view.
　　Key Risks for Rating
　　Unexpected production disruption at JV mines;
　　Unfavourable setting of new pricing formula.
　　Valuation
　　Reiterate BUY rating. We lift CGNM’s 2026E earnings forecast by 14% on higher spot/term price assumptions (US$120/110 per pound respectively), and assume a new formula to reduce exposure to lighter-traded spot price.
　　Our new SOTP TP of HK$2.40 implies 10x 2026E P/E, which we deem as attractive. CGNM remains our sector top pick for 2025.