CGN Mining’s (CGNM) final results came in in line with previous profit alert, as one-off markdown of investment in Fission dragged down 2024 profits. As spot price started to stabilise last week and the “tariff day” edges closer, we expect a new term contracting cycle to prop up both term and spot price in the coming months. CGNM’s new pricing formula for 2026-28 period will also be a major catalyst in 2H25. We trim CGNM’s 2025 EPS by 3% on longer-than-expected spot price weakness in 1Q25. Reiterate BUY rating with unchanged SOTP-based TP of HK$2.40.
　　Key Factors for Rating
　　Results recap. CGNM reported NP of HK$342m for continuing operations. It recorded losses from discontinued operations of HK$185m, mainly due to the one-off loss arising from the share swap between Fission Uranium and Paladin Energy (PDN, NR). PDN traded at a much lower share price when the deal completed in Dec 2024 compared to the deal valuation date, leading to the markdown of investment in Fission. Going forward, as CGNM holds only 2.61% of PDN, it will be classified as “financial assets at fair value through OCI”. Therefore, PDN’s future share price fluctuation will not affect CGNM’s P&L.
　　Industry outlook. Spot uranium price saw support at US$63/lb last week, rebounding to US$65.5/lb by the weekend. Looking ahead, the next important juncture will be Mr. Trump’s tariff announcement due 2 April, which will shape the new paradigm of global trading practices. Once the tariffs are set in stone, utilities and miners could come to the table to kick off another round of contracting. Conveniently, the World Nuclear Fuel Cycle conference will provide such an occasion on 8-10 April, which may align S/D information and facilitate further contracting, in our view.
　　New Pricing Formula for 2026-28. CGNM’s current connected transaction pricing formula will expire by end-2025, and the company expected to announce new pricing formula for the next three years in 2H25, subject to minority shareholder approval. As the prevailing term price is significantly higher than the base price in the current formula (US$80 vs US$66.17), a reasonable new formula will significantly lift CGNM’s realised ASP in sales to parentco and bode well for the bottom line.
　　Key Risks for Rating
　　Later-than-expected tariff certainty; Lower-than-expected contracting volume; Higher-than-expected secondary supply.
　　Valuation
　　We trim CGNM’s 2025 EPS by 3% on lower ASP assumptions for 1H25, mainly due to longer-than-expected spot price weakness in 1Q25. Reiterate BUY rating with unchanged SOTP-based TP of HK$2.40.