Page 137 - RusRPTFeb21

dividend to be paid for 2020 at $3.3bn, for a 6.5% yield.
The 2021 production guidance presented at the capital markets day on December 1 was confirmed. For the core assets, the guidance implies a 3% decline in nickel and a 1.5-2.2% decrease in PGM production this year (following very strong output for both last year), along with a 6% decline in copper production, as Nornickel ran out of the high-grade concentrate it bought from Rostec a few years ago. For Bystrinsky, the 2021 guidance envisages 9% growth in copper output to 65-75 kt and flattish gold output of 230-240 koz.
The stock is trading at a 4.8 2021E EV/EBITDA at spot commodity prices and the current $/RUBrate, and at a 5.5 EV/EBITDA at the commodity prices in our base case (which implies revenues 9% lower than at spot prices). In both cases the multiple is below the historical average of 6.0-6.5. We reconfirm our positive view on the stock given the attractive valuation and our positive long-term outlook for Nornickel's commodity basket.
Evraz published a 4Q20 trading update showing strong volumes for its Russian steel and coal divisions. ​The Russian division's crude steel production in 4Q20 grew 5% q/q to 3.0mn tonnes (3% above our forecast). Production for the full year increased 0.8% y/y to 12.05mn tonnes.
Sales of steel products from the Russian division increased 13% q/q to 3.05mn tonnes, driven by high sales of semi-finished products (+30% q/q) thanks to strong demand in Asian markets. Finished product sales declined 4% q/q to 1.34mn tonnes, supported in part by the sale of 170 kt of steel products from inventories. Among Russian steel producers, Evraz showed the strongest q/q volume growth, but as the growth was driven by sales of semis its product mix deteriorated the most q/q. As a result, the average realized price for Evraz's Russian steel division underperformed the price growth of flat steel producers, climbing just 5% q/q (versus 8% for Severstal and 7% for MMK) to $455/tonne.
For the Russian steel division, the average cash cost of slab was up 12% q/q to $224/tonne. This was driven by slightly higher iron ore production cash costs (up 6% q/q to $37/tonne), higher costs of purchased concentrate (Evraz is around 70% integrated in iron ore) and the high capacity utilization rate of the higher-cost blooming mill, which produced additional semi volumes.
ROM coal production in 4Q20 jumped 26% q/q to 6.0mn tonnes, bringing 2020 output to 20.6mn tonnes. We note that the 4Q20 coal run rate already implies 24mn tonnes of annualized production (in line with the 2018 level and slightly below 2019), which means that Evraz was able to quickly adjust to the good coal market conditions in China and prepare for the rebound in global coking coal prices that is now underway. Evraz guides further ROM coal output growth in 1Q21. We have 25mn tonnes of ROM coal production in 2021 in our model, up 21% y/y.
137 ​RUSSIA Country Report​ February 2021 www.intellinews.com