Key investment points
The company announced its 2024 results, achieving revenue of HK$8.624 billion, a year-on-year increase of 17.05%, and net profit to mother of HK$0.342 billion, a year-on-year decrease of 31.20%. The company's main business is operating steadily, and the sharp fluctuation in 2024 results was mainly due to mid-term withholding tax on Austrian company dividends and terminated business losses (Paladin's share exchange to acquire Fission and sale of property assets). Excluding these factors, the company achieved net profit of about HK$0.64 billion in 2024, an increase of about 29% over the previous year.
The main business is operating steadily, and rising uranium prices have helped the company achieve its performance
The company's main natural uranium trading business is operating steadily, with 2024 revenue of HK$8.624 billion, up 17% year on year. Among them, 1294 tU products were underwritten, which was basically the same as in 2023 (1299 tU). The average selling price was 75.04 US dollars/pound U3O8, and the average cost was 80.80 US dollars/pound U3O8; international sales companies sold 4593 tU, with an average selling price of 71.99 US dollars/pound U3O8, sales cost 71.12 US dollars/pound U3O8.
In the resources sector, in 2024, the company held 34,000 tU of natural uranium equity resources, with an equity output of 1,324 tU, of which Xie Company produced 964 Tu and Austrian Company produced 1,739 Tu. The production costs of Xie Mine, Yi Mine, China Mine, and Mining were 32/24/22/31 US dollars/lb U3O8, respectively.
Without dragging down performance, disruptions are all one-off shocks
The company's performance in 2024 was mainly dragged down by the Austrian company's withholding tax on supplementary dividends (approximately HK$0.124 billion), loss of property assets (approximately HK$14.76 million), and asset value loss (approximately HK$0.17 billion) due to Fission's share exchange acquisition by Paladin, which led to a sharp decline in performance.
Specifically, the Austrian company's withholding tax on past years' dividend payments was challenged due to the tightening tax environment in Kazakhstan, so the company used a 15% dividend tax rate to make up the dividend tax difference for previous years; the book value loss caused by the Fission share exchange case was mainly due to the Canadian government's review of the acquisition case, which delayed the completion of the transaction and Paladin's stock price fluctuated greatly during the period. The above non-recurrent disturbances are all one-time impacts and are not expected to have an impact on the company's subsequent operations.
2025 natural uranium market - see the sun from the clouds, break the ice and be reborn
The spot price of natural uranium has been sluggish for almost half a year. The latest spot uranium price is only about 64 US dollars/lb U3O8, which is a sharp departure from the Changxie uranium price of 80 US dollars/pound U3O8. We believe that the continued decline in spot uranium prices from the end of 2024 to the end of 2024 is mainly due to the fact that overseas, especially the US, still has great uncertainty in terms of geography, economy, trade policies, etc., which in turn has led to low trading sentiment among spot market participants. Maintaining a long-term price of 80 US dollars/pound U3O8 can better reflect the actual supply and demand situation in the natural uranium market.
Looking ahead to the future market, uncertainty will eventually be eliminated, and the short-term price slump due to trade sentiment will eventually gradually recover to a level close to the Changxie price as sentiment returns to rationality. The general trend of global nuclear power recovery has not changed, and the pattern of tightening supply and demand in the natural uranium market has not abated. Spot uranium prices have bottomed out, and we can look forward to seeing the tide.
Backed by CGN Group, heavy snow growth in Changpo can still be expected
As the only natural uranium resource development and operation platform under the CGN Group, the company continues to grow as the Group operates nuclear power. By the end of 2024, CGN Electric Power had 28 operating units, with a capacity of about 32 GW, 8 units under construction, and a capacity of about 10 GW. In the future, CGN will operate a nuclear power scale of nearly 42 GW per year, corresponding to the demand for natural uranium exceeding 8,000 tU (measured by 200 Tu/GW consumption). We are optimistic that the company will follow the growth of the CGN Group and continue to develop.
Profit forecasting and valuation
Considering the continued decline in spot uranium prices in 25Q1 and our judgment on mid-term natural uranium prices, assuming that spot uranium prices in 25-27 were 75/85/90/lb U3O8, respectively, the company is expected to achieve net profit of 0.52/0.854/1.131 billion HKD, and EPS was 0.07/0.11/0.15 HKD/share, respectively, corresponding to PE 20X/12X/9X. The natural uranium market is sluggish in the short term, but we are still optimistic about the long-term trend. The company relies on stable demand from the CGN Group, and future growth can still be expected, maintaining the company's purchase rating.
Risk Alerts
Global demand for nuclear power fell short of expectations, natural uranium supply was released beyond expectations, and uranium prices fluctuated greatly.
