Shares in Deep Yellow Ltd (ASX: DYL) have fallen by more than a third over the past year, but the analysts at Morgans think it's time to take another look at the company.
The broker has a speculative buy rating on Deep Yellow shares and a bullish price target, which I'll get to shortly.
First let's look at why they believe Deep Yellow could be in line for a rerating.
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Deep Yellow's major project heading in the right direction
Deep Yellow's flagship project is the Tumas uranium project in Namibia, where the company is targeting a final investment decision in the fourth quarter of 2026.
The company in August announced it had secured a long-term water supply for the mine, as well as an agreement for Namibian private company Oponona to take a 5% stake in the project, in line with the Namibian Ministry of Mines and Energy's requirements for supporting local ownership.
Regarding the recent updates, Deep Yellow Managing Director Greg Field said:
These milestones build on completed bulk earthworks, major civil and concrete works now underway, and continued progress across engineering, procurement, optimisation and financing. Tumas is becoming progressively more de-risked and construction-ready. We have real momentum and will continue systematically closing out the remaining workstreams as we build the strongest possible platform for a disciplined investment decision.
Deep Yellow shares looking cheap
In a research note to clients, Morgans said that since a previous decision to defer the project's sanctioning, "uranium market conditions have improved materially, detailed engineering has advanced, key infrastructure agreements have been executed and project financing work has continued''.
Morgans added:
We believe Tumas is emerging as one of the more advanced undeveloped uranium projects globally, although funding, execution and contracting risks remain. With several important milestones now largely complete, we think investors should reacquaint themselves with the asset before the next phase of the story begins.
Morgans also said the decision to delay the project had "aged well", with long-term uranium prices strengthening and contracting conditions more supportive of producers.
They added that Namibia was a tier-1 jurisdiction, the deposit was a well-understood style, and it had a long-life production profile which compared favourably with many undeveloped peers.
The broker also noted:
DYL offers leveraged exposure to a strengthening uranium market through its flagship Tumas Project. We believe the market is underappreciating the value of a development-ready uranium asset with significant leverage to improving industry fundamentals.
Morgans has a target price of $1.95 on Deep Yellow shares compared to the current price of $1.30.
Deep Yellow is valued at $1.32 billion.
