Page 98 - RusRPTAug20

came lower than we had anticipated, at a 3.4% yield despite the more than 130% payout. However, this positive surprise was partly offset by a further investment into the loss-making NBH joint venture and the increased capex guidance for 2020. Nevertheless, given our improved price forecasts for 2H20, and having incorporated the strong 2Q20 results, we increase our 2020 earnings forecasts and our 12-month Target Price to $19/GDR, which now implies a 3% ETR; Hold reiterated. The 2Q20 results were strong, beating us and the consensus by 5% and 7%, respectively, on EBITDA, mostly on the back of the intersegment release and so we treat this as a one-off. FCFE also came above our estimates, mostly driven by a working capital release. The company announced $0.68/GDR dividends for the quarter (a 3.4% yield), implying a payout of 115% FCFE (adj. for excess capex). Thus, the payout totalled 85% for 1H20 and though we highlighted before that the company might catch up in 2Q20 after paying 60% in 1Q20, this is still below our expectations. We do not rule out, though, the company catching up further in 2H20.
Magnitogorsk Iron and Steel Works​ (MMK) has reported neutral 2Q20 earnings​. EBITDA (excluding the one-off legal claim) matched our expectations, while the company decided to announce 1H20 dividends due to improved domestic demand. The latter, amplified by the end of capital repairs in 2Q20, might result in a 20% q/q recovery in output and EBITDA almost doubling q/q. Our unchanged 12-month Target Price of $12.00 offers an 84% ETR: Buy reiterated. EBITDA in line, dividends announced sooner. Headline EBITDA of $226mn was below our and the market expectations, due to the $20mn legal claim by the Russian state technical authorities against MMK’s coal division unit. Adjusted for that, EBITDA was in line with our and consensus expectations. Nevertheless, FCFE of $-21mn was in line with our expectations. The company has decided to announce its 1H20 dividends slightly ahead of the initial plan (autumn this year), suggesting DPS of $0.11 (1.5% yield).
Evraz​'s coal production at Raspadskaya down 35% y/y in 2Q20 to 2.1mnt – ​30% below expectations. According to a company press-release, Raspadskaya produced 2.1mnt of coal in 2Q20, down 35% y/y and 28% q/q.Total coal output in 2Q20 was 30% below our expectations. Evraz had already stopped the production of semi-soft coking coal at Raspadskaya mine, reallocating part of the released equipment to the Raspadskaya-Koksovaya mine to produce hard coking coal (HCC), and it remains unclear, whether production at the mine would be resumed. However, as the company’s other assets all continue to work in line with the plan, and given the 9% q/q increase in HCC output in 2Q20, we expect a double-digit increase in HCC production in 3Q20F. In light of the 29% y/y decline in coal production in 1H20, we note that there is a downside risk of at least 7% to Raspadskaya’s coal production guidance for 2020 (the company has previously guided for an 8% y/y decline in 2020).
● Fertilisers
Phosagro​ has revealed that 2Q20 was its fourth consecutive quarter with double-digit sales volumes growth. ​While fertilizers output improved 4% y/y, sales exceed last year's volumes by 11% indicating strong demand, in our view. The production gain is comparative with that recorded by Acron (5% y/y), so this allows us to expect relatively solid sales volumes growth from Acron, too. Both companies focused on expanding their core products, as PhosAgro
98​ RUSSIA Country Report​ August 2020 ​ ​www.intellinews.com