The company announced its 2023 annual results. The company achieved a turnover of HK$7.368 billion for the full year of 2023, an increase of 101.04% over HK$3,665 million in 2022, and realized profit of HK$497 million, a decrease of 3% year-on-year from HK$515 million in 2022. The main reason for the increase in revenue was that CGN International Sales Company grasped the active period of the natural uranium market and increased sales volume throughout the year; the main reason for the decline in net profit was that Austrian fines affected the company's investment income by about HK$95 million. If this factor is excluded, the company benefited from the increase in natural uranium spot prices and achieved a net profit of about HK$587 million in 2023, up 14% from the same period in 2022. The company achieved net profit of HK$317 million in the second half of 2023, up 76.6% month on month and 98.6% year on year.
Benefiting from the rise in natural uranium prices, the company's trade-side revenue increased dramatically. Self-production trade (underwriting): The company sold 1,299 tons of natural uranium in 2023 (1,321 tons in 2022), a year-on-year decrease of 1.7%, achieving sales revenue of HK$1,688 billion, an increase of 26% over the previous year. As the annual increase in natural uranium prices exceeded the base price in the sales price mechanism, the average sales price was US$64.42/lbu3O8, and the average sales cost was US$64.9/lbu3O8, achieving a gross profit of HK$12 million. International trade: The company sold 5670 tons of natural uranium in 2023 (3055 tons in 2022), achieving sales revenue of HK$5.672 billion and gross profit of HK$141 million, an increase of 60% over the previous year. As of the end of 2023, the company held 697 tU of natural uranium, with a weighted average cost of 49.61 US dollars/lbu3O8; the sales volume of natural uranium that had been signed but had not yet been delivered was 3303 tU, and the weighted average selling price was 56.78 US dollars/lbu3O8.
Mining investment returns have reached a new high, and multi-stage (in production, under construction, research) project reserves guarantee the continuous operation of the company.
At the end of 2023, the company's total equity resources were 39,000 tU, and the equity output was 1,277 tU; of the equity resources, mines in production (Xie Mine, Yi Mine, China Mine) accounted for 54%, and mining under construction (Mining) accounted for 18%, and Investigable Projects (PLS) accounted for 28%. In 2023, the company's joint ventures (Xie Company) and joint ventures (Austrian Company, Fission Company) contributed a total investment income of HK$606 million, and the estimated net profit per unit was 27.03 US dollars/lbu3o8. If the impact of Austrian fines was excluded, the net profit per unit was 31.26 US dollars/lbu3o8, a record high. ① Xie Company (49% equity) achieved an investment income of HK$273 million; the actual amount of uranium extracted was 976 tU, of which the production cost was 27 US dollars/lBu3O8, and the production cost was 23 US dollars/lBu3O8. After processing losses, a total of 963 tU of natural uranium was produced throughout the year; due to changes in resource evaluation standards and parameters in Kazakhstan and revisions to the local “Water Resources Law”, some ore bodies in the Iraqi mine were adjusted from reserves to resource amounts. ② The Austrian Company (49% equity) achieved an investment income of HK$320 million; the actual amount of uranium extracted was 1,644 tU, of which 1,513 tU of Chinese mining, the production cost was 17 US dollars/LBu3O8, and the production cost was 27 US dollars/lBu3O8. After processing losses, a total of 1,642 tU of natural uranium was produced throughout the year; the company started mining work on the mining site in October 2023 and began construction of a hydrometallurgical workshop. ③ Fission (12.62% equity) achieved an investment income of HK$13 million, focusing on the development of its PLS projects. On January 17, 2023, Fission released research results showing that the PLS project is expected to produce about 35,000 Tu during the lifetime, the mine can last 10 years, the production cost is about 9.77 US dollars/lbu3O8, the internal rate of return is about 27.2%, and the payback period is about 2.6 years. Fission submitted an application for the construction of a uranium mine and hydrometallurgical plant in the Asapascal Basin to the Canadian Nuclear Safety Commission in April 2023; it completed 2 engineering geological holes and 10 hydrogeological holes in the PLS project in June, and is expected to complete all pre-engineering design work in June 2024.
Operating cash flow entered the improvement channel, increasing HK$1.74 billion. The company's operating cash flow increased by HK$17.4 billion in 2023 to HK$1,242 million; achieved an investment cash flow of HK$477 million; net cash flow recovered to HK$955 million, and the cash balance increased by HK$960 million to HK$1,017 million by the end of 2023.
Profit forecast. The triple nuclear energy agreement was catalyzed, and the price of natural uranium moved upward. We expect uranium prices to remain at $80/lBu3O8 in 2024-2026. In terms of output, based on the construction progress of the mine and the production schedule of Xie Company and Austrian Company, we expect the mine equity output in 2024-2026 to be 1385/1556/1703 Tu, respectively. We adjusted the company's revenue for 2024-2026 to HK$99.7/106.3/HK$11.27 billion, respectively, and net profit to mother of HK$9.8/10.4/1.12 billion, with year-on-year growth rates of 96.56%, 6.14% and 8.22%. The PE calculation corresponding to the closing price on March 22, 2024 was 11.7x, 11.0x and 10.2x, respectively, maintaining the “buy” rating.
Risk warning: the pace of Fission development and mining expansion falls short of expectations; risk of international exchange rate fluctuations; risk of falling short of expectations in nuclear power construction; risk of falling uranium prices