We forecast CGN Mining to report a net loss of ~RMB68mn in 1H25E, due to (1) a one-off negative margin of the uranium trading business, and (2) a decrease in the spot uranium price in 1H25 that may affect the margin of JVs (mining segment). We therefore slash our 2025E earnings forecast by 47% to RMB260mn to reflect the potential weak 1H25E results. That said, we regard the impact as one-off, and expect the margin of trading business to return to positive in 2H25E. Besides, with the spot price of uranium recovering since May, we expect the JV’s margin to rebound in 2H25E. Looking ahead, the new pricing mechanism for the off-take agreement with the parent company starting from 2026E will boost strong earnings growth, given a much higher contract price. We therefore maintain our BUY rating and see any potential pullback after the 1H25 results announcement as entry opportunities. We revise down our NPV- based TP to HK$2.42 from HK$2.61.
　　Trading business as the major reason for potential loss in 1H25E. CGN Global is the uranium trading division of the Company. In 1H25, the unit cost of procurement was ~US$68-74/lb, while the ASP was US$58-61/lb. We estimate the unit loss was ~US$11/lb. The reason is that the cost was calculated based on the weighted average cost of all inventories, while the ASP was based on the specific contract price executed during the period. In 1H25, the margin was hurt by some lower pricing contracts signed in the past.
　　Positive trading margin is likely in 2H25E. We see the negative margin in 1H25E was largely one-off, and expect the margin to return to positive.
　　A recap on the new off-take agreement with parent company (2026-28): The fixed price in 2026E is set at US$94.22/lb (with 4.1% increment per year in 2027E/28E), which is way higher than the US$61.78/lb in 2023 (with annual increment of 3.5% in 2024/25) under the current mechanism. The fixed price proportion will be reduced to 30% from 40%, which will help reduce the mismatch between the JV’s ASP and off-take pricing.
　　Risk factors: (1) further trading loss; (2) pullback of spot uranium price; (3) lack of improvement of sulphuric acid supply in Kazakhstan.