Uranium price recovery is on the rise, and the company's performance is expected to grow steadily
In 2023, the company achieved operating income of HK$7.368 billion, +101.04% YoY, and net profit to mother of HK$497 million, or -3.46% YoY. The main reason for the decline in net profit is the rising price of raw materials such as sulfuric acid, which has led to a deterioration in mine costs. The shortage of sulfuric acid raw materials may continue in 2024, or cause a slight increase in costs. Based on this, we lowered our 2024, 2025, and 2026 profit forecasts. We expect the company's net profit to be HK$8.52, 9.29, and HK$1,089 billion for 2024-2026 (the predicted values before 2024-2025 were HK$13.25 and HK$1,652 billion, respectively), and EPS was HK$0.11, 0.12, and 0.14, respectively, corresponding to PE on March 24, 2024 14.72, 13.50, 11.51 times As a leader in the uranium industry, the uranium project is progressing smoothly and maintains a “buy” rating.
Financial expenses are growing rapidly, and cost growth is dragging down profits
The main reason for the decline in the company's net profit in 2023: (1) Due to the increase in interest-bearing debt and the rise in US dollar interest rates, the company's financial expenses rose sharply. The company's financial expenses in 2023 were HK$131 million, +113% over the same period last year.
(2) Due to the rapid rise in the price of production materials such as sulfuric acid in Kazakhstan, workers' wages, amortization of mine preparation work and asset depreciation, underground resource use tax adjustments, etc., the full cost of the company's natural uranium has increased significantly. (3) Due to production and operation issues before the acquisition, the company paid HK$96 million in compensation to the Kazakh government.
The uranium project is progressing smoothly. It is expected that in 2024, the company's natural uranium production will remain stable. In 2023, the company's natural uranium equity will produce 1,276 tons of uranium, of which Xie will contribute 472 tons of uranium and the Austrian company will contribute 805 tons of uranium. The overall progress of the company's project is progressing smoothly. The contract for the use of underground resources in the Yikang Mine has been extended to 2030, construction of the Za Mine Hydrometallurgical Plant has officially started, and the PLS project has submitted an EIA report. According to Kazakh's production guidelines, we expect the company's natural uranium equity production to remain stable in 2024.
Optimistic about uranium prices for a long time, natural uranium recovery is on the rise
On the demand side, nuclear energy continues to develop steadily, and the number of nuclear power installations worldwide continues to increase. On the supply side, since 2028, production mines have successively entered a peak period of production cuts and decommissioning. At the same time, the secondary supply level is at a historically low level. Resuming and increasing production in the short term is not enough to change the short supply situation. The medium- to long-term natural uranium supply and demand gap continues to expand, and natural uranium recovery is on the rise.
Risk warning: Nuclear safety incidents, implementation of nuclear power plant plans falling short of expectations, production falling short of expectations.