We are upgrading Centrus Energy (LEU) to a Buy rating based on an improved valuation framework and significant strategic progress in high-assay low-enriched uranium (HALEU) enrichment. The stock’s forward enterprise value/EBITDA multiple has contracted by 20% over the past quarter, making the current valuation the most attractive since the company first announced its HALEU pilot program in late 2023. Management’s successful achievement of key milestones, including achieving 20% enrichment levels on schedule, has de-risked the path to commercial production and supports our thesis that Centrus can generate positive free cash flow by 2027.

In December, Centrus secured a conditional award of $900 million from the U.S. Department of Energy to build a full-scale HALEU enrichment facility at the Piketon, Ohio site. This grant covers approximately 60% of the total project cost, which is estimated at $1.5 billion. Engineering design work is complete, and site preparation is set to begin in Q2 2026. The facility is slated to ramp to a capacity of 3,000 metric tons per annum of HALEU by 2030, positioning Centrus as the only U.S.-based supplier capable of meeting the Department of Defense’s requirements for advanced reactors and naval propulsion.

Centrus holds a strategic monopoly on commercial-scale HALEU in the United States, with proprietary gas centrifuge technology that achieves enrichment levels up to 20%. Major reactor developers such as TerraPower and X-Energy have already contracted for initial deliveries, representing over $250 million in bookings through 2032. The global market for HALEU is projected to exceed $10 billion by 2035, driven by over 30 planned advanced reactor projects worldwide. Centrus’s ability to fulfill government and private-sector contracts places it at the center of a rapidly expanding supply chain.

While near-term revenues remain modest—projected at $50 million in 2026—the long-term earnings power of a fully operational HALEU facility is estimated at $400 million annually with EBITDA margins above 50%. The company’s balance sheet, strengthened by the DOE grant and a recent $200 million equity raise, carries net debt of $350 million against $120 million in cash. We believe that as the Piketon facility moves into construction and initial commercial deliveries commence in 2028, investors will begin to re-rate the stock, reflecting its transition from development stage to a cash‐flow generating enterprise.