CICC: Cuts CGN MINING (01164) target price by 36% to HK$3.07, maintains "Outperform" rating

CICC released a research report maintaining its "Outperform" rating on CGN MINING (01164), but cut the target price by 36% to HK$3.07 due to a decline in uranium stock valuations caused by rising US Treasury yields, corresponding to 31.3x and 21.0x P/E in 2026 and 2027, implying 50% upside from the current share price. Considering short-term international trade losses and rising costs, the bank lowered its net profit forecasts for 2026 and 2027 by 29%/5% to HK$750 million and HK$1.11 billion. The company announced its Q3 2026 operating report. The bank believes that the drag on profitability from cross-period deliveries in the trading business is gradually being removed, the Kazakhstan uranium mining projects are operating stably, and the company is expected to benefit from the upcycle in the natural uranium industry. CICC's main views are as follows: Q3 2026 uranium production slightly exceeded the production plan overall In Q3 2026, the company's uranium production was 642.4 tU, with a plan completion rate of 101.8%. Xie Company's natural uranium production was 160.5 tU, with a plan completion rate of 104%, of which the actual production at Xie Mine was 74.4 tU and at Yi Mine was 86.1 tU. Ao Company's natural uranium production was 481.8 tU, with a plan completion rate of 101%, of which the actual production at Zhong Mine was 406.7 tU and at Zha Mine was 75.2 tU. The trading business achieved profitability for two consecutive quarters, and the drag on profitability is gradually being removed In Q3 2026, the company held 1,019 tU of natural uranium at a weighted average cost of US$82.2/lb; it delivered 1,502 tU to customers during the quarter at a weighted average price of US$86.8/lb, higher than the inventory cost of the natural uranium held. In Q1 2026, losses in the company's trading business dragged on profit; since Q2, the trading business has achieved profitability for two consecutive quarters, and the negative impact of cross-period deliveries in international trade on profitability is gradually being removed. Looking at new contracts, 746 tU was newly contracted on the procurement side at a weighted average cost of US$87.7/lb; 887 tU was newly contracted on the sales side at a weighted average price of US$90.44/lb, and the newly contracted orders have good profit margins. A strong market supports rising long-term contract prices, and uranium prices are expected to resume their upward trend In September 2026, the long-term contract uranium price rose to US$96.5/lb, but the spot price remained at a low of US$89.6/lb. The natural uranium long-term contract price has broken through the nearly two-decade high of US$95/lb set in 2008, reflecting that fundamental supply and demand are in a historically strong range, but the spot market is constrained by tightening financial conditions and has low activity. The bank believes that with the start of the downstream procurement peak season and an improvement in liquidity conditions, the spot uranium price is expected to resume its upward trend and converge toward the long-term contract price, and the company is expected to benefit from the upcycle in the natural uranium industry. Risk warnings Uranium mine supply releases exceed expectations; nuclear power development falls short of expectations; sulfur costs rise.