2024 results miss our expectations
　　CGN Mining announced its 2024 results: Revenue grew 17% YoY to HK$8.62bn, profit from sustainable operations grew 8% YoY to HK$527mn, and attributable net profit dropped 31% YoY to HK$342mn. Its attributable net profit missed our expectations, as earnings from its terminated business was lower than expected.
　　Overall, the average sales price of natural uranium was US$75/pound in 2024 and the average sales cost of natural uranium was US$80.8/pound at the company. In 2024, its equity production was 1,324tU and the company completed the procurement and sales of 1,294tU uranium. It completed its full-year production target. The company’s cost increased in 2024 due to rising sulfuric acid prices and higher MET taxes pushed up costs.
　　Semizbay-U: In 2024, the actual production volume of natural uranium was 976tU. Specifically, the actual uranium extracted from the Semizbay Mine was 407tU, with the production cost at US$32/pound; the actual uranium extracted from the Irkol Mine was 569tU, with the production cost at US$24/pound. The investment income was HK$399mn.
　　Ortalyk: In 2024, the actual production volume of natural uranium was 1,783tU. Specifically, the actual uranium extracted from the Central Mynkuduk Deposit was 1,663tU, with production cost at US$22/pound; the actual uranium extracted from the Zhalpak Deposit was 120tU, with production cost at US$31/pound. The investment income was HK$617mn.
　　The share swap transaction involving Fission resulted in losses fromdiscontinued operations. In December 2024, the company exchanged its 11.26% stake in the divested Fission for a 2.61% stake in Paladin. Due to the decline in Paladin's share price in the second half of 2024, this transaction generated a HK$180mn loss from discontinued operations, which dragged down its attributable net profit attributable in 2024.
　　Trends to watch Spot uranium prices are expected to converge toward long-term contract levels; upbeat on the long-term price growth. Since 2024, thespot price of uranium has dropped due to procurement hesitancy and increased supply from uranium mines. The spot price of uranium reached a year-low of US$65/pound in February 2025. In our view, the spread between spot price and price locked in long-term contracts has reached - US$15/pound, hitting a historical low. Given high-cost projects and recovering procurement demand, we think the spot price of uranium will likely realign with the price locked in long-term contracts. On the demand side, overseas tech giants such as Microsoft and Google are ramping up investments in nuclear power. On the supply side, Kazakhstan’s uranium mines will gradually enter a phase of production cuts and mine closures starting from 2028, underpinning the uranium price growth in the long term.
　　Financials and valuation
　　Due to the decline in spot uranium price, we cut our 2025 net profit forecast 36% to HK$538mn and introduce our 2026 net profit forecast of HK$760mn. The stock is trading at 23x 2025e and 16.3x 2026e P/E. We expect uranium price to increase in the long term; therefore, we maintain an OUTPERFORM rating and keep our TP unchanged, implying 35.5x 2025e and 25.1x 2026e P/E, offering 54% upside.
　　Risks
　　Supply from uranium mines exceeds expectations; development of nuclear power disappoints; Kazakhstan policies are changed.