JSC "Kazatomprom" released its financial report for 2024. Revenue showed solid growth amid an increase in average realized prices. Moreover, operating margin declined only slightly. In our valuation model, we updated key financial indicators, lowered forecasted revenue and uranium price projections, and increased the cost of capital. As a result, our valuation of Kazatomprom's stock decreased to 24,700 KZT, with a growth potential of 30% from the current price on KASE. Recommendation – "Buy".
(+) Record annual revenue. The company’s revenue for 2024 reached a record 1.8 trillion KZT, growing by 26% y/y. The main drivers of this growth were revenues from uranium sales (+20% y/y) and uranium product sales (+66% y/y). However, the company's attributable uranium sales volume for the year totaled 12.8 thousand tons, 14% lower than in 2023 due to increased supplies to LLP "Ulba-FA" for uranium products (fuel pellets and assemblies) manufacturing. At the same time, overall uranium production increased by 10% y/y. Thus, the key factor behind revenue growth was a 26% increase in the average selling price, while the average market price rose by 36%.
(=) Margin declined slightly. Compared to the previous year, profitability saw a slight decline in terms of operating profit. Gross margin fell from 53% to 49%, largely due to a 42% y/y increase in raw material and supply costs caused by a sulfuric acid shortage and rising uranium prices. However, EBITDA margin declined less significantly—from 44.6% to 43.5%—thanks to a 62% y/y increase in net profit from associated and joint ventures. Adjusted net profit attributable to shareholders, excluding a one-time non-cash gain of 296 billion KZT from business acquisition (JV "Budenovskoye"), amounted to 577 billion KZT (+38% y/y), or 2,223 KZT per share.
Our opinion and valuation model changes. Kazatomprom's report can be considered moderately positive due to record annual revenue. Given the slight decline in margin, the company's net profit grew significantly. However, free cash flow for dividend calculation increased by only 5.6% y/y, meaning that a significant dividend increase should not be expected this year. In our valuation model, we lowered forecasted revenue due to declining market uranium prices. Additionally, WACC was slightly increased. As a result, the new target price for Kazatomprom’s shares is 24,700 KZT, with an upside of 30% from the current market price. Recommendation – "Buy".