CGN Mining has reported 1H26 results: revenue rose 19% YoY to HKD2,025mn, while the attributable net loss widened 18% YoY to HKD80.06mn, owing to delayed delivery of some natural uranium products to 2H26, higher unit cost of sales on rising prices of sulphuric acid and other raw materials, and a temporary inversion between the weighted average cost of booked inventory and contracted selling prices in the international trading business. Looking ahead, we expect the adverse factors to fade in 2H26: 1) Natural uranium delivery volumes should rise HoH in 2H26, and with spot uranium prices entering an uptrend in August, the company should show greater earnings sensitivity to spot uranium prices. 2) As of end-1H26, CGN International Sales held undelivered natural uranium with an ASP of USD88.58/lb vs a weighted average cost of USD80.88/lb, leaving arbitrage room and supporting a likely full-year turnaround. We view the near-term earnings pressure as largely temporary, and reiterate our sector recommendation based on the rigid supply-side bottleneck in global natural uranium. Maintain BUY.
Industry prosperity continues to strengthen
The global nuclear power industry is entering its most intensive expansion window in nearly three decades. China has 36 units under construction, accounting for more than half of the global total. The US has raised its 2050 nuclear installed capacity target from 300GW (proposed in November 2023) to 400GW, and the DOE has committed USD17.5bn to support construction of up to 10 Westinghouse AP1000 units. AIDCs have also become a new source of demand growth, with the four major CSPs—Microsoft, Google, Amazon and Meta—having signed a large number of nuclear power agreements as of end-1H26. On the supply side, Kazatomprom expects TQZ sulphuric acid plant to be completed 6-12 months later than planned, and this to be incorporated into its 2027 production guidance assessment. This potentially reinforces the rationale of tight natural uranium supply and higher prices in 2027. Long-term contract prices rose from USD89/lb in January to USD95.5/lb in July this year, reaching an all-time high. Since August, spot prices have accelerated upward amid improved liquidity as financial institutions began purchasing and a widening futures-spot spread. We are positive on the fundamental trend in 2H26.
Earnings forecasts and valuation
Given the larger-than-expected cost increase in 1H26 and disruptions from cross- period factors in international trade, we lower our 2026/2027/2028 net profit forecasts to HKD780/1,109/1,325mn (previous: HKD1,041/1,337/1,570mn), with EPS of HKD0.10/0.15/0.17. We reference the 2026E valuation midpoint of 58x PE for comparable companies on Bloomberg consensus (previous: 41x PE). Considering the strengthening US nuclear policy expectations since early 2026, the higher future earnings potential of Westinghouse's business under comparable company CCJ, and the rising premium from the geopolitical "safe haven" attributes of North American nuclear power, we apply a slight discount to the company. Meanwhile, given that Paladin Energy's PE valuation has risen much faster than other companies in the sector, we prudently maintain a 2026E PE of 37x and lower our target price to HKD3.70 (previous: HKD5.07, based on 37x PE for 2026E). BUY.
Risks: nuclear accident risk, and weaker industry demand than we expect.