CGN MINING(01164) 招银国际·2024-11-20 14:03Investment Rating - The report initiates coverage with a "Buy" rating for the company, setting a target price of HKD 2.36 based on a 3x net present value (NPV) calculation [2][4]. Core Insights - The company is expected to benefit from a structural growth trend in nuclear power, leading to increased demand for natural uranium over the next decade. This is coupled with limited uranium supply, which is anticipated to keep uranium prices elevated in the coming years [2]. - The average uranium price is projected to rise to USD 85 per pound in 2024, representing a year-on-year increase of over 30%, with further annual increases of 8% expected in 2025 and 2026 [2]. - The company's net profit is forecasted to double by 2026 compared to 2023, despite a projected decline in net profit for 2024 due to increased tax expenses [4]. Summary by Sections Company Overview - The company holds stakes in four low-cost uranium mines located in Kazakhstan through joint ventures with Kazatomprom (KAP). The average mining cost for these mines ranges from USD 17 to 27 per pound, which is considered low on a global scale [3]. Financial Projections - For 2023, the company's net profit is expected to decline by 11% to HKD 440 million, primarily due to a significant increase in tax expenses. However, net profits are projected to rebound with increases of 52% and 63% in 2025 and 2026, respectively [4]. - The sensitivity analysis indicates that a 1% increase in uranium spot prices could lead to a 0.7% increase in net profit for the company [4]. Cost and Tax Considerations - The report notes an increase in Kazakhstan's mineral extraction tax (MET), which will rise from 6% in 2024 to 9% in 2025. However, the overall impact of the new tax regime is expected to be manageable due to the relatively small scale of the mines [3]. - Anticipated increases in production costs are projected at 12% and 9% for 2025 and 2026, respectively, due to tight sulfuric acid supply [3].