Page 169 - RusRPTNov21

DY of some 8%), and the possible placement of GDRs on Moscow Exchange.
· Updating our model for the 3Q21 results, we reiterate our 12-mo TP of $5.00 (ETR +21%), and Buy recommendation.
Russian Railways (RZD) published its October operating results 1 November. Cargo volumes were up only 0.5% y/y to 110.3mnt during the month, coming in below RZD’s projected growth of 0.9% y/y. The October figures showed cargo volumes up only 0.5% y/y to 110.3mnt, although total cargo volumes for January-October were up 3.4% y/y to 1,066.5mnt. The main contributors to dynamics for last month were oil and oil products (+10.1% y/y to 18.5mnt), ferrous metals (+9.1% y/y to 6mnt) and timber (+6.5% to 3.3mnt). However, cargo volumes for grain (-25% y/y to 2.4mnt), coke (-9.1% y/y to 1mnt) and building materials (-8.4% to 1.6mnt) experienced the largest drops last month. Freight turnover and freight turnover taking into account empty wagon runs were up 3.5% y/y and 3% y/y to 231.3bn tkm and 291.2bn tkm in October, respectively. The growth in RZD’s cargo volumes came in below RZD’s projection of 0.9% y/y. Volumes of coal, the primary cargo transported on Russian railways, were down 0.9% y/y to 32.4mnt in October.
9.2.13 Other sector corporate news
Segezha Group, which continues to combine the growth ambitions of an IT-company and the cash generation capability of an industrial company, has purchased a group of forestry assets in Siberia for $515mn.
This doubles its forest resources and sawn timber capacity, and makes Segezha the 2nd largest sawn timber player in Europe, and one of the top-10 globally. This is set to boost the company’s 5y EBITDA CAGR from a strong for industrials 16% to a solid for IT 22%. The deal multiple of 4.5x EV/EBITDA 2021F is 40% below Segezha’s (large discounts are also familiar in the IT-sector). This creates 15% of additional value for shareholders. Hence, we increase our 12-mo TP to RUB13.50 (42% ETR) and reiterate a Buy. On our calculations, the purchased forest base could lead Segezha to a unicorn-level market capitalisation by 2030.
Assets. 10.9mn m3 AAC (+86% of current capacity), 1.5mn m3 sawn timber capacities (+111%), 170kt pellets production (+72%) and 35k m3 plywood mill (+17%). It also has a 99-strong river fleet in the Krasnoyarsk and Irkutsk regions, so has a favourable location for export to the fast-growing Asian markets (20% of revenues).
Financing. The value of the deal is around RUB37bn (24% of Segezha’s Mcap), excl. ca. RUB6bn of net debt. RUB9bn is to be paid by Oct-21, RUB24bn in Jan-22, and the remaining RUB4bn in 2023 and 2024. This is to be financed with RUB10bn from IPO proceeds and a RUB25bn new bond issue (expected in Nov-21). The group’s ND/EBITDA is to increase from 2.0x as of YE21F to 2.9x by YE22F, we estimate.
169 RUSSIA Country Report November 2021 www.intellinews.com