Page 167 - RusRPTNov21

production growth (P-acid +8%, Sulphuric acid +6% YoY).
● However, ammonia output was hit (-8% YoY) with scheduled
repairs at ammonia plants in Aug-Sep. This cut urea output
9% YoY.
● NPK/NPS volumes declined 16% YoY, as they might provide
a smaller margin than DAP/MAP due to the more expensive inputs (potash and Sulphur), we think.
Sales volumes declined 3% YoY to 2.6mnt. Given the 15% QoQ increase vs. the 2% QoQ change in output, there was an inventories release in the quarter, which will likely be restored during 4Q21, in our view.
Overall, the numbers are slightly negative, but not decisive for the financials, as peaking fertilizer prices will in our view more than offset this volumes drop in the financials, leading to revenues doubling with an EBITDA margin close to 50% .
9.2.12 Transport corporate news
Sovcomflot held its first Investor Day. While no major news was revealed, the event showed the company’s openness to investors and the market. Given the details on the recent contracts, we slightly increase our 12-mo TP to RUB 128 (ETR +52%), and reiterate our Buy recommendation. The stock trades at 6.7x 2022F EV/EBITDA, a 25% discount to its closest peers MISC, and in line with conventional tanker peers. Below are our comments.
The results as a public company. Since Sovcomflot went public a year ago, its stock has brought a 12% negative total return, which we attribute to the weakness of tanker rates. However, we believe that the market has overlooked the development of the industrial segment, which has seen its backlog grow 25% since then, to USD 25bn. We calculate that it will contribute a steady 5-6% dollar DY starting from 2024. Another 2-3% is to come from the conventional segment.
Vostok Oil. Management did not provide any new details when asked about its participation in Rosneft’s Vostok Oil project, only saying that negotiations are ongoing. In our view, the company’s expertise in the Arctic makes it the #1 candidate. We estimate that the project might bring some USD 450mn of equity value to SCF if it is the sole participant, 16% of the Mcap.
Free-float increase. When asked about a possible SPO, the company noted that the decision was up to shareholders and that, according to the government decree, the state’s share might be diluted to 75% (currently 83%). While some news sources saw this phrase as important, we believe that the comment was mostly technical and no share issue plan is on the table. Our understanding is that both the major shareholder and management see the current price level as unjustifiably low for any placements.
(E)SG. Sovcomflot plans to benefit from the intermediate part of the energy transition, where fossil fuels like coal and oil are to be substituted with LNG. We agree, but think that the company needs to
167 RUSSIA Country Report November 2021 www.intellinews.com