中广核矿业：低成本铀矿具优势

Investment Rating - The report initiates coverage on China General Nuclear Power Corporation Mining (1164 HK) with a "Buy" rating and a target price of HKD 2.36, reflecting a potential upside of 32.0% from the current price of HKD 1.79 [3][15]. Core Views - The report anticipates a structural growth in nuclear power demand over the next decade, which will benefit natural uranium prices, projected to remain high due to limited supply [1]. - The company holds stakes in four low-cost uranium mines in Kazakhstan through joint ventures with Kazatomprom, positioning it well to capitalize on rising uranium prices [1]. - The average uranium price is expected to rise to USD 85 per pound in 2024, a year-on-year increase of over 30%, with further annual increases of 8% in 2025 and 2026 [1][7]. Financial Projections - The report forecasts a net profit of HKD 4.4 billion for 2024, a decline of 11% year-on-year, primarily due to increased tax expenses [1][7]. - Net profits are expected to rebound in 2025 and 2026, with projected increases of 52% and 63%, respectively [1][7]. - 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 [1][7]. Operational Insights - The company’s main profit sources are the joint ventures with Semizbay-U and Ortalyk, which are expected to contribute net profits of HKD 9.5 billion, HKD 10 billion, and HKD 11 billion for 2024, 2025, and 2026, respectively [7]. - The average production costs for the mines are projected to rise by 12% and 9% in 2025 and 2026, respectively, due to tight supply of sulfuric acid [1][7]. Valuation Methodology - The target price is based on a net present value (NPV) calculation, reflecting future cash flows discounted to present value, with a multiple of 3x NPV applied [1][15]. - Long-term assumptions include uranium prices starting at USD 101 per pound from 2027, increasing by 1.5% annually, and a stable price of USD 107 per pound from 2032 to 2042 [15].