They have a $72.00 target. GLTA
EQUITY RESEARCH
Analyst Day Takeaways; Cameco Our Top Pick
Our Conclusion
Cameco hosted a 2023 Analyst Day on December 19 that in our view was a
positive update, and notably constructive on uranium and nuclear
fundamentals. This was in line with our expectations. We already prefer
uranium commodity exposure and rate Cameco Outperformer and Top Pick
in our coverage universe.
Our key takeaways from the presentation include: there is a scarcity
premium for western supply like Cameco’s as having a Canadian product is
an advantage in contract negotiations post Ukraine invasion; the company
has strong ESG metrics as the business model focuses on a clean and
secure energy future; and recent market shifts have allowed for both higher
floors and ceilings on the contract book.
The company highlighted that in the bull cycle of the 2000s, long-term
contracting activity increased first and prices followed afterwards, and
peaked near the end of the cycle. However, in this cycle, pricing are leading
contracting activity, and 2023 contracting will likely fall short of replacement
rates. This is a strong market setup and supports our view that uranium
prices are a few years into a multi-year upward trend.
Key Points
Overview. Opening remarks noted that nuclear demand is more durable
than ever, highlighted by COP28 pledges to triple nuclear capacity by 2050,
including the U.S. As well, geopolitical events of the last two years have
created a scarcity premium for western product and services. In our view,
nuclear has a leading role to achieve net-zero targets by 2050, and policy
makers are now reversing anti-nuclear stances and increasingly factoring
nuclear as a net-zero solution.
Westinghouse President and CEO Patrick Fragman noted that the 3.6%
revenue growth rate previously communicated is based on the current
customer base but doesn’t reflect new market share that is captured. Of the
33 Russian-built reactors in EU and Ukraine, Westinghouse has signed 25
and produces the only non-Russian fuel that can be accepted in Russian
reactors. Mr. Fragman also commented about the design, engineering and
procurement of its reactors such as AP1000 (proven) technology, AP300
SMR (not yet commercial), and eVinci microreactor development. The larger-
scale AP1000 is in operation in China and the U.S. and other states are set
to follow. The AP300 is based on the AP1000 technology but is one smaller
loop rather than two larger loops. This SMR technology is under
consideration globally but needs licencing and approvals. Overall,
Westinghouse is the original equipment manufacturer or a technology
provider to 50% of global nuclear reactors.