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cash generation to maintain a benign leverage profile, even with the coming dividend payment," VTB Capital (VTBC) said in a note on August 24. Currently the announced dividends (RUB5.93/share) imply a 70% FCF pay-out, as previously announced by the company. This yields 6.2% from the current price, Aton estimates. "The strong overall 1H18 results and upbeat 2H18 outlook will support a near 100% dividend payout for 2H18," in VTBC's view. The bank maintained a 12-month target price of RUB130, suggesting an estimated total return of 52%, and reiterated a Buy recommendation. Aton Equity estimated that Alrosa is trading at 4.7x 2018 estimated consensus Enterprise Value to Ebitda, offering a discount to global diversified miners (5.1x), as well as global PGM producers (9.2x) and large-cap gold-miners (8.4x). "We reiterate a BUY rating and confirm our target price of RUB115/share that implies a target multiple of 6.2x (on our estimates), which we find reasonable for an MSCI-included company with good liquidity ($17mn/day), industry-leading dividends (10-13% yield) and a unique commodity exposure (diamonds)," Aton wrote.
Troubled Russian steel and mining major Mechel reported 10% quarter-on-quarter revenues growth to RUB82bn ($1.2bn) for the second quarter, with Ebitda jumping by 25% to RUB23bn. Both mining and metals segments showed growth in the reporting quarter. In 2014 Mechel that was on the verge of bankruptcy managed to reach a $5bn debt restructuring agreement with Russia's largest banks Sberbank, VTB, and Gazprombank. The company controlled by businessman Igor Zyuzin posted the first profit in five years in 2016 and got another unforeseen bump from high coal prices in the beginning of 2017 .
Alrosa reports the second quarter of 2018 IFRS that beats expectations on costs and raises expectations . Alrosa has reported strong the second quarter of 2018 earnings, with EBITDA beating VTBC estimate by 15% and the consensus by 11% on better cost performance and lower-cost inventory accounting in P&L. While FCF was in line with our estimates, we expect further healthy cash generation to maintain a benign leverage profile, even with the coming dividend payment. The strong overall the first half of 2018 results and upbeat the second half of 2018 outlook will support a near 100% dividend payout for the second half of 2018, in our view. Our 12-month Target Price remains unchanged at RUB 130, suggesting an ETR of 52%, and we believe our above-consensus forecasts will begin to prove out in the second half of 2018. Buy reiterated. Stronger earnings on better costs. the second quarter of 2018 EBITDA was RUB 41.3bn, 11-15% ahead of our and consensus expectations due to lower costs. Indeed, production cash costs and total SG&A were 4% and 9% below our expectations, respectively (RUB 1.9bn lower overall). The fuel and energy, materials and labour cost items were all lower than we had forecast. Moreover, the inventory change was RUB 2.7bn less than we had expected, as the company might have accounted for cheaper ore inventories in P&L in the second quarter of 2018. FCF in line, supports previously-announced the first half of 2018 DPS. As such, FCFE came only slightly higher than we had expected due to the higher working capital build-up and schedule of tax and interest payments (ND/EBITDA is at 0.04x, almost in line with our estimate). FCFF of RUB 62bn supports the previously-announced dividend of RUB 5.93/share (70% pay-out ratio). VTBC expects healthy FCFE generation to continue in the second half of 2018, supported by seasonally higher prices in the third quarter of 2018 (better mix) and potential market price upside, as the diamond market is strong. Cash generation will be additionally supported by Catoca dividends, in our view, while the majority of Nyurba consolidation costs are likely to be offset by RUB 10.5bn cash inflow from Mir mine insurance. Cash generation might also be subject to further upside from ongoing $RUB weakening. Hence, we forecast ND/EBITDA to stay below the long-term target of 0.5-1.0x.
Phosagro has released a strong set of financials. Sales were RUB 56.6bn (+27% y/y, +4% Q/q), EBITDA RUB 18.7 (+53% y/y, +31% Q/q), and
120 RUSSIA Country Report September 2018 www.intellinews.com