BOCI Securities: Reiterates over-weight rating on the natural uranium industry and expects long-term trade contracts to rebound in 2026.

China International released a research report stating that the average increase in the four covered natural uranium stocks from the beginning of the year to now is 44%, mainly due to the rise in spot prices and the overall strength of the metal mining sector. The bank expects several catalysts in the short term that may further boost investor sentiment, and the fundamentals of natural uranium remain strong. After two consecutive years of low long-term contracting volumes, the bank expects long-term contracting volumes in 2026 to rebound, driving spot and long-term prices to hit historical records. The bank raised its expectations for the spot price of natural uranium at the end of 2026/27 to $120 and $150 per pound, respectively. After adjusting profit forecasts and valuation multiples, the bank raised the target prices of three natural uranium producers. Reaffirming an overweight rating on the natural uranium industry, the recommended order of stocks remains HAYATONGCGN MINING(01164/target price of HK$5.80)=KAMEKOCNNC INT'L(02302). The main points of China International are as follows: Long-term prices reach new highs, and signing activities in the seller's market are expected to increase According to preliminary readings at the end of January by UxC, the long-term price rose slightly by $2 per pound to $88 per pound, reaching a new high of 17 years. According to Numerco data, the spot price also rose to $91.25 per pound last night, also a 20-month high. In the fourth quarter of 2025, long-term signing activities surged to 71.8 million pounds, a 35% increase year-on-year. However, the total long-term contracting volume of 116 million pounds in 2025 is still far below the bank's estimated exchange needs of about 180 million pounds. The bank expects utilities to have to catch up in 2026 to replenish stocks. However, unrealistic unfinished tender documents with price ranges suggest that not all utilities are ready to accept this new reality. Industry insiders believe that the expected floor price for producers is $90 per pound and the ceiling price is $150 per pound, higher than the range of $80-140 per pound last year. The bank believes that further refusal to accept this price may lead to higher bidding in the future. Financial buyers act ahead of utilities While utilities hesitated, financial institutions were actively taking action. SPUT has just submitted a prospectus to the Ontario Securities Commission for a 25-month, $2 billion offering to purchase natural uranium, with an annual cap still at 9 million pounds. According to SPUT's announcement, half of the amount, $1 billion, is allocated to a secondary market plan issued at market prices, which was successfully updated on January 26. The bank expects SPUT to raise a significant amount of money through this plan in the coming days. Considering the $162 million in cash it held as of the previous closing day, assuming SPUT raises an additional $200 million and reserves $60 million as a management fee, the bank estimates that SPUT will be able to buy about 3.3 million pounds (about 1280 tons) of uranium at $90 per pound in the short term. The bank believes that other similar financial instruments, such as Yellowcake, which also trades at prices above asset net worth, may also enter the market to profit while utilities are still hesitating. Watch for more potential catalysts HAYATONG will announce its fourth-quarter operational update on February 2, as well as the highly anticipated 2026 production guidance. The bank currently predicts a slight increase (+7%) in production in 2026, and if the actual guidance is lower than expected, the market will become more tense. On February 13, KAMEKO will announce its performance for the fourth quarter of 2025, at which time the market will also focus on its production guidance and market dynamics update. Another potential event, although without a specific date, is the expansion of the US strategic uranium reserve. The reserve was established in 2020 and received $75 million in funding in 2022, but it is currently too small relative to its 97GW of nuclear power capacity. Further federal funding will take more effective supply off the market. In addition, the US government may also set a floor price for natural uranium imports, which benefits its domestic companies to expand production.