Shareholders' net profit increased 44.7% year-on-year in the first half of 2020
The company announced its ideal 2020 interim results yesterday. Shareholders' net profit for the first half of the year rose 44.7% year on year, which is the upper limit of the 30-50% increase predicted by the company's earlier earnings, mainly due to (1) rising uranium prices, plus a 5.5% year-on-year drop in average production costs. Kazakhstan (Kazakhstan)'s Semizbay-U (Semizbay-U) joint venture uranium mining enterprise (holding 49.0% equity) increased 106.0% year on year to HK$40.44 million; (2) The company's effective cost control, and gross margin rose 6.6 percentage points to 11.8% in the first half of this year; ( 3) The sales price of the natural uranium trading business increased by 14.0% year on year, roughly offsetting the impact of the 14.5% year-on-year drop in related sales volume on the company due to the impact of the pneumonia epidemic.
The pneumonia epidemic has affected mineral production, but the pneumonia epidemic has driven global uranium prices to rebound to recent highs. Some global uranium ore producers announced production cuts or cessation of production in March to March of this year, causing the supply of natural uranium to be tight and driving global uranium prices to rebound to recent high levels. The spot price rose by more than 40.0% from $24.5 per pound in early 2020 to a recent high of $35.0 per pound in May. We expect it will take time for uranium ore producers to resume production, and uranium prices will remain at the high level of recent years in the second half of the year.
If the acquisition of the Kazakh project is successful, it will greatly increase the company's uranium package sales by more than 200%. The company's acquisition of 49.0% of Ortalyk's interests in Ortalyk (Ortalyk) is still ongoing. Ortalek owns two uranium mines in Kazakhstan. If the acquisition is successful, it will result in the company's uranium ore package sales volume rising by more than 200.0% from the current 588 tU to 1,813-1,935 tU.
Valuation is not high
According to the closing price on August 25, 2020, the company's price-earnings ratio in 2019 was 13.4 times. Compared with other mining stocks, such as Zijin Mining (2899 HK; unrated) and Jiangxi Copper (358 HK; unrated), the company's valuation is not high.
Risk Alerts: (1) Project Development Delays, (2) Global Uranium Production Increase, and (3) Political Risks Derived from the Sino-US Trade War.