What's new
　　On June 3, 2025, CGN Mining signed a new sales framework agreementwith CGN Uranium Resources Co., Ltd. This agreement covers the periodfrom January 2026 to December 2028 and will take effect after bothparties sign the agreement and obtain approvals from independentshareholders.
　　Comments
　　The pricing formula for natural uranium in the new sales frameworkagreement is: Price = 30% * forecasted natural uranium price over 2026–2028 (US$94.22/pound) * annual escalation factor (1.041) + 70% * latestspot price indicator available on the date of delivery1. The pricingmechanism for 2023–2025 is: Price = 40% * forecasted uranium price over2023–2025 (US$61.78/pound) * annual escalation factor (1.071) + 60% *latest spot price indicator available on the date of delivery. We suggestpaying attention to following key aspects.
　　The forecasted natural uranium price exceeds marketexpectations and will likely boost sales price. The price of naturaluranium is set at US$94.22/pound, much higher than average spotprice of US$71/pound and long-term contract price of US$80/pound.
　　This forecasted natural uranium price over 2026–2028 is derivedfrom the average of projections from two leading market analysts:TradeTech’s regular long-term price forecast of US$99.33/pound andUxC’s High Long-Term Price Projection2 of US$89.11/pound. In ourview, this demonstrates CGN Mining's conviction in the long-termupward trajectory of uranium prices. We think the high forecastedprice will likely boost the company's sales price when uranium priceis low in the market.
　　The proportion of latest spot price indicator3 has increased,which helps enhance the pricing flexibility. Under the new salesframework agreement, the proportion of latest spot price indicator has　　risen from the original 60% to 70%. This “allows CGN Mining tobenefit from the rising trend in the spot market”4. Based on thecurrent spot uranium price of US$71/pound, we estimate that theactual sales price of uranium to the CGN Uranium Resources underthe new agreement will be approximately US$78/pound in 2026.
　　CGN Mining provides production guidance for subsidiaries;equity uranium output likely to increase. Based on operationalplans from Semizbay-U and Ortalyk, CGN Mining estimatescontracted sales volumes for subsidiaries at 1,438 tU (402 tU fromSemizbay-U and 1,036 tU from Ortalyk) in 2026, 1,617 tU (392 tUfrom Semizbay-U and 1,225 tU from Ortalyk) in 2027, and 1,598 tU(300 tU from Semizbay-U and 1,298 tU from Ortalyk) in 2028.
　　Financials and valuation
　　Given the new sales framework agreement and rebounding uraniumprices, we raise our 2025 and 2026 net profit forecasts 14% and 31% toHK$611mn and HK$1.00bn. The stock is trading at 26.5x 2025e and 16.3x2026e P/E. As the new agreement has reflected the company’sexpectations for uranium price hikes, we maintain our OUTPERFORMrating and TP of HK$2.51, implying 31.2x 2025e and 19.2x 2026e P/E andoffering 18% upside.
　　Risks
　　Supply from uranium mines exceeds expectations; development of nuclearpower di sappoints; Kazakhstan policies are changed.