FY24 shareholders' net profit fell 31.2% year on year

FY24 shareholders' net profit fell 31.2% year on year to 0.34 billion yuan (HK$, same below), mainly due to (1) a sharp rise in income tax of 360.9% year over year to 0.29 billion yuan. The company received a preferential tax rate of 5% on dividends received from the Kazakh affiliate Ortalyk (Ortalyk), but according to the country's new law, it is required to pay 15% withholding income tax (HK$0.125 billion) and make up the dividend withholding tax difference for 2020-2023 (HK$0.124 billion); (ii) the profit from terminated operations (after tax) was converted from FY23's 10 million profit to FY24's loss of 0.18 billion yuan. The company originally held 11.26% of the Canadian-listed uranium miner Fission. In December 2024, Paladin (PDN AU) completed a share exchange to acquire Fission (1 Fission share in exchange for 0.1076 Paladin shares).

The company eventually held 2.61% of Paladin's shares, but recorded a book loss of 0.17 billion yuan. Excluding these two factors, real profit increased by about 29% year over year to 0.64 billion yuan. In fact, the profit of joint ventures and joint ventures reflecting the uranium mining business rose sharply by 71.5% year over year to 1.02 billion yuan, mainly due to rising sales prices (see below).

Reborn dividends throughout the year

The company's annual dividend was 1.0 HK cents per share, with a dividend ratio of 22.2%. It was also announced once again after FY20.

Uranium mining business continues to expand

The company's uranium business in Kazakhstan continues to expand. The total output and total sales volume of FY24 uranium ore increased by 3.8% and 4.1% year-on-year to 2,703 Tu and 2,711 Tu, respectively. Among them, the total output of Zhalpak Mine (Zhalpak Mine) under the joint venture company is 133 TU, and the expansion of mining is ongoing. It is expected that the total production capacity will reach 500 TU and 900 Tu respectively by 2027 and 2029. In terms of price, the sales price and sales cost of FY24 uranium ore increased by 29.7% and 23.8% year-on-year to 83 US dollars/pound and 26 US dollars/lb, respectively, and the cost ratio decreased from 32.8% to 31.3%.

Short to medium term challenges

Since last year, some US technology companies have proposed the development of nuclear energy projects to meet energy needs. Although the development period is long, in principle, it is still beneficial to support long-term uranium prices. However, in the short to medium term, the CGN mining industry faces two main challenges: (1) From 2023 to 2025, the company will sell all self-produced uranium products to the parent company CGN Group based on the share of project equity, and will set the price according to the following mechanism: sales price = (40% * base price) + (60% * spot index). The pricing mechanism after 2025 has not been announced, which will have a significant impact on the future profits of the company's uranium mining business; (2) In 2024, global uranium ore supply will increase by about 7% (about 4,000 Tu) year on year to 59,000 Tu to ease supply pressure. Supply is also expected to continue to increase over the next two to three years.

Risk warning: (1) project delays, (2) increased global uranium production, (3) slowing nuclear power development, and (4) regulation/policy risks.