Page 115 - RusRPTJan22

export.
· Pork production dropped significantly in September (-7% YoY), while
growth resumed in October. However, pork prices are now falling, and since a large increase in production is expected in the next year, it might negatively affect pricing in the industry.
· Large meat export markets (China, Japan) are still closed for wide Russian exporters. Rusagro is currently designing a plant in the Russian Far East to service the needs of the Japanese market.
· Price caps on sugar and bottled oil ended on 1 October, while the domestic export regime with a floating tariff pressures the profitability of producers. The sustainability of exports is vital for agricultural companies, as domestic markets are stable and not expanding.
· The company has allocated several billion roubles on digitalisation in the last five years. At this stage, Rusagro is strengthening the direction of artificial intelligence and moving on to robotisation, noting one of the most rapid transformation paces in the industry globally.
Rusagro has announced the completion of the 2021 harvesting campaign, with volumes up 12% YoY to 5mnt, fully in line with our model. The increase came solely on improving yields across the mix, while the key driver was sugar beet (up 19% YoY) on more favourable weather conditions and better crop protection initiatives. For the current season, we anticipate Rusagro’s margin reverting to mid-cycle levels and model 2022F EBITDA declining 10% YoY to RUB 38bn (also reflecting the record high comparison base). The stock has gained 35% YTD. It now demands 2022F EV/EBITDA of 5.7x and offers a dividend yield of 11%, we calculate, which are among the most appealing in the consumer sector, in our view.
● The total harvest increased 12% YoY to 5mnt in 2021. The advance reflects a 10% YoY rise in harvesting yields (blended 9.5t/ha) and 2% addition in area (528k ha).
● Sugar beet rebounded from the previous disappointing season, with total output gaining 27% YoY. That was sufficient to cover 70% of internal needs for the refining division, with the remainder coming from market purchases.
● Grain volumes declined 27% YoY to 827kt, due to adverse weather which pushed yields down (13%) and a lower preference in rotation (area lost 16%).
● Favourable prices and export opportunities significantly raised the area under soy and sunflower seeds (up 22%). They also saw decent yield dynamics (4% lower).
● Rusagro’s results came in line with Russia's overall balances for MY22 (July/June). In numbers, the grain harvest decreases 8% YoY to 123mnt, sunflower gains 14% YoY to 15.2mnt, and sugar bounces 10% YoY to 5.8mnt, reflecting the robust balances for the current farming season.
● Rusagro has become a beneficiary of the rapid price growth and we model 2021F EBITDA surging 32% YoY to RUB 42bn. As the cost base is picking up, we see the EBITDA margin sliding 2.5pp
115 RUSSIA Country Report January 2022 www.intellinews.com