The uranium industry has been a great place to be over the last 12 months.
A number of ASX 200 uranium stocks have delivered huge returns for investors during this time.
But if you thought the good times were over for investors, think again.
That's the view of analysts at Bell Potter, which are tipping Paladin Energy Ltd (ASX: PDN) shares as a buy with big return potential.
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What is the broker saying about this ASX 200 uranium stock?
According to a note, the broker was pleased with Paladin Energy's quarterly update and the successful ramp up of the Langer Heinrich operation. It commented:
Langer Heinrich ramp up – All comes out in the wash Our FY24 production estimate had initially been ~450klbs, however we upgraded this figure in our previous note to ~700klbs to account for a higher sales guidance in FY25 (we operate a one quarter delay on production to sales). We maintain our FY25 production and sales estimates of 4.5Mlbs and 3.9Mlbs respectively.
Management commentary noted that the Langer Heinrich ramp up remains on track with operating metrics (throughput, recoveries, processed grade etc) meeting expectations. Going forward, sales and revenue will remain lumpy on a QoQ basis, making it difficult to estimate heading into results periods. Over the year, these results should balance out.
In light of the above, the broker has reaffirmed its buy rating and $15.70 price target on this ASX 200 uranium stock.
Based on its current share price of $12.43, this implies potential upside of 26% for investors over the next 12 months.
Why is the broker bullish?
Bell Potter highlights that this ASX 200 uranium stock is operating in a (uranium) bull market and deserves a premium valuation. Particularly given that it is already producing the chemical element and offers greater liquidity than peers. It explains:
PDN operating a uranium asset in a bull market for the commodity is likely to command a premium to the sum-of-the-parts valuation in our opinion. We have applied a 10% premium to our base valuation which is supported by 1) PDN being a current producer with a comparatively lower risk restart project at Langer Heinrich, and 2) PDN offering domestic institutional investors greater liquidity than peers. Additional factors which may support this thesis would include consolidation and M&A activity.
Our +12m forward DCF derived valuation is maintained at A$14.27/sh, and with the 10% premium to NAV explained above, our target price is maintained at $15.70/sh. We maintain our Buy recommendation in accordance with our rating structure.
Overall, this could make Paladin Energy a great option if you're looking for exposure to this side of the market.
