CGN MINING(HK:01164)2024-05-07 01:32Investment Rating - The report initiates coverage with an "Outperform" rating for CGN Mining Company (1164 HK) [9][34]. Core Views - CGN Mining is positioned to benefit from the recovery of the global nuclear power sector and the continuous growth in natural uranium demand, aiming to become a leading international supplier of natural uranium [5][10]. - The company has a strong financial performance, with significant revenue growth driven by its natural uranium business, which accounted for nearly all of its revenue in 2023 [14][28]. - The global natural uranium market is experiencing upward price trends due to supply shortages and increased geopolitical tensions, supporting a bullish outlook for uranium prices in the medium to long term [21][28]. Summary by Sections 1. Company Positioning - CGN Mining is a subsidiary of CGN Group, the largest nuclear power group in China and the third largest globally, focusing on the development and trade of natural uranium resources [10][19]. 2. Financial Performance - In 2023, CGN Mining achieved a revenue of HKD 7,368 million, a year-on-year increase of 101.04%, primarily from natural uranium sales [14][19]. - The company’s net profit decreased by 3.44% to HKD 497.1 million, indicating potential concerns regarding cost control and profitability [14][19]. 3. Global Uranium Price Trends - The report highlights a significant increase in uranium prices, with expectations for continued growth due to supply constraints and rising demand for nuclear energy [21][28]. - The average sales price for natural uranium is projected to rise to USD 79.5, USD 81.4, and USD 82.6 per pound from 2024 to 2026 [6][32]. 4. Internal Synergies with CGN Group - CGN Mining benefits from its close ties with CGN Group, which has a projected demand for approximately 6,120 tons of natural uranium in 2024, indicating a substantial supply gap compared to the company's current sales volume [6][31]. - The company has secured flexible pricing agreements that will allow it to capitalize on rising uranium prices [6][32]. 5. Profit Forecast and Valuation - The forecast for FY24-26 anticipates revenues of HKD 9,203 million, HKD 11,267 million, and HKD 13,162 million, with corresponding net profits of HKD 543 million, HKD 642 million, and HKD 745 million [6][33]. - A DCF valuation model estimates a target price of HKD 2.81 per share [6][33].