After a half-year of silence, on June 20th, the Shanghai and Shenzhen stock exchanges newly accepted applications from two companies. Among them, as the first mainboard IPO applicant after the new "Nine National Measures," the natural uranium mining and smelting enterprise China Uranium Industry Co., Ltd. (hereinafter referred to as "China Uranium") is not only part of the "national team" but also demonstrates "hardcore" financial data in its prospectus.

Importantly, there is currently no listed company on the A-share market engaged in natural uranium mining and smelting related businesses. If China Uranium successfully passes the hurdles, it will be the sole target.

However, it is worth noting that the distribution of China's nuclear industry chain determines that China Uranium's upstream and downstream are mainly related parties, resulting in a large scale and proportion of related party transactions. Whether this will become an obstacle to its IPO remains to be observed.

The "debut" of the mainboard after the new listing rules

The prospectus shows that China Uranium is mainly engaged in the comprehensive utilization of natural uranium and radioactive co-associated mineral resources. The sales of natural uranium products are mainly aimed at the nuclear power field and meet the needs of national defense construction. The main business orders come from customers such as China National Nuclear Corporation and its subordinate units, and Singapore Rio Tinto, making it a monopoly enterprise in the development of domestic natural uranium resources.

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China Uranium has a total of 6 exploration rights and 18 mining rights at home and abroad. According to the statistics of the World Nuclear Association (WNA), the company has been among the top ten global natural uranium producers for many years.

It can be said that China Uranium has its own "moat." The prospectus shows that uranium resources are an important barrier to the uranium mining and smelting industry. According to relevant laws and regulations in China, uranium resources are owned by the state. Natural uranium is the material basis for the construction and development of the nuclear industry, which is related to the country's national defense security and energy security, and has important strategic significance. The state exercises strict control over it.

In terms of equity structure, China National Uranium Industry directly holds 65.77% of the shares of China Uranium, making it the controlling shareholder of the company. China National Nuclear Corporation (CNNC) indirectly controls 79.48% of the shares of China Uranium through China National Uranium Industry, Xunhe Fund, China Nuclear Power, China Atomic Energy, Nuclear Chemistry and Metallurgy Institute, and China National Nuclear Land, making it the actual controller of China Uranium.

CNNC is the main body of China's nuclear science and technology industry, with a complete nuclear science and technology industrial system. It has listed companies such as China Nuclear Power, China Nuclear International, China Isotope and Radiation, China Nuclear Energy Technology, China Nuclear Engineering, and Tongfang Shares.

In terms of financial data, according to the prospectus, China Uranium's operating income from 2021 to 2023 (hereinafter referred to as the "reporting period") was 8.906 billion yuan, 10.535 billion yuan, and 14.801 billion yuan, respectively; the net profit attributable to the parent company was 823 million yuan, 1.335 billion yuan, and 1.302 billion yuan, respectively.In this initial public offering, China Uranium Industry has chosen to go public under the first set of standards for the main board under the new listing rules, which are "a positive net profit for the last three years, with a cumulative net profit of no less than 200 million yuan over the last three years, a net profit of no less than 100 million yuan in the most recent year, and a cumulative net cash flow from operating activities of no less than 200 million yuan over the last three years or a cumulative operating revenue of no less than 1.5 billion yuan."

China Uranium Industry's net profit attributable to the parent company, before and after deducting non-recurring gains and losses, are 759 million yuan, 1.26 billion yuan, and 1.302 billion yuan, respectively, with a cumulative total of 3.321 billion yuan, which is significantly higher than the threshold set by the new listing rules. Additionally, the company has a substantial asset scale, exceeding 19 billion yuan.

However, during the reporting period, the net cash flow from operating activities of China Uranium Industry showed a downward trend, which is contrary to the trend of net profit. The company explained that the difference in the trend and amount is mainly due to the changes in inventory, operating receivables, and operating payables.

Furthermore, in 2023, China Uranium Industry made a one-time dividend distribution of 740 million yuan, accounting for 57% of the net profit attributable to the parent company for that year, and 21.38% of the cumulative net profit attributable to the parent company for the three years prior to listing. The company stated that this distribution was made to implement the profit distribution to shareholders as per the transitional period profit and loss attribution arrangement for new and old shareholders when the company increased its capital in August 2021.

China Uranium Industry also stated in its prospectus that the cash dividend ratio is expected to be no lower than the average level of dividends distributed in the three years prior to listing, within the first three years after listing.

The peculiarity behind related party transactions:

The natural uranium business accounts for about ninety percent of China Uranium Industry's main business revenue, making it the primary source of income.

In the natural uranium industry, only China Uranium Industry and its subsidiaries and joint ventures are engaged in domestic natural uranium mining and smelting operations, and there is no industry competition in this business field.

In the domestic nuclear power natural uranium supply field, in addition to China Uranium Industry, there are two other suppliers: China Guangdong Nuclear Uranium Development Co., Ltd. and China National Nuclear Corporation Uranium Development Co., Ltd. The former mainly supplies natural uranium to the nuclear power stations under the China Guangdong Nuclear Power Group, and the latter mainly supplies natural uranium to the nuclear power stations under the State Power Investment Corporation. Therefore, this is a unique industrial chain, which is also reflected in the peculiarity of China Uranium Industry's operational data.

Firstly, in terms of comparable listed companies in the same industry, since there are currently no A-share listed companies engaged in natural uranium mining and smelting related businesses, China Uranium Industry has chosen two foreign natural uranium manufacturers, Hareon and Cameco, as well as China Guangdong Nuclear Mining, a H-share listed company, as comparable companies for its natural uranium business.China Uranium's gross margin from its natural uranium business is lower than that of Hanwha, but higher than Cameco. Meanwhile, China General Nuclear Power Mining's main business is the trade of natural uranium, without involvement in the mining and smelting production of natural uranium. During the reporting period, the gross margin levels of their natural uranium trade business were comparable.

In terms of related party transactions, during the reporting period, China Uranium's sales to the top five customers were 7.493 billion yuan, 8.237 billion yuan, and 11.979 billion yuan, respectively, accounting for 84.14%, 78.18%, and 80.93% of the total revenue for the respective periods.

Among the top five customers, CNNC (China National Nuclear Corporation) is a related party. During the reporting period, China Uranium's related sales to CNNC and its subsidiaries were 5.821 billion yuan, 5.059 billion yuan, and 7.925 billion yuan, respectively, accounting for 65.36%, 48.02%, and 53.54% of the total revenue for the respective periods, which can be described as "half the kingdom." This is mainly due to the sales of natural uranium and other products to CNNC and its subsidiaries.

China Uranium stated that, on one hand, the nuclear industry chain itself has the characteristic of high concentration; on the other hand, CNNC is the only group in China that possesses a complete nuclear fuel cycle industry, with a significant demand for natural uranium products. The distribution of China's nuclear industry chain determines that China Uranium's upstream and downstream are primarily related parties, which is in line with the industry structure and operational characteristics, and is both necessary and reasonable.

In the prospectus, China Uranium emphasized its ability to operate independently and to develop markets, and it is continuously strengthening its efforts to develop customers. In terms of domestic customers, in 2022, it has successfully developed new customers outside of CNNC; for foreign customers, it has sold natural uranium to customers such as Rio Tinto Group, Orano, and SPUT.