Page 173 - RusRPTApr21

payments and thus is more sustainable. As a result, we expect RusHydro’s dividend to reach the 8-9% range in the coming years. We increase our 12-month Target Price to RUB1.00 ($1.35/GDR), implying an ETR of 34% (37%), and reiterate our Buy recommendation.
FY20 – best year on record. Driven by the solid production figures, RusHydro delivered its strongest bottom line on record. Formally, the company's net profit rose an impressive 72 times, hitting our expectations, though missing consensus by 15% due to higher write- offs and the deferred tax payment. As a result, at a 50% payout, RusHydro is due to pay RUB23.3bn in dividends, or RUB0.053/share, implying a 6.7% yield.
Write-off moderation to drive profits further. During the conference call, newly appointed CFO Sergey Terebulin confirmed that the company planned to stick with its 50% payout, with the minimum payment at the 3-year average dividend level. However, we do not think RusHydro will use the floor, and expect its net profit to grow further, by more than a third in 2021F. The critical contribution is going to be the significant moderation of various write-offs on the balance sheet (confirmed by management) and the substantial inflow of subsidies, which in 2020 totalled an impressive RUB46.7bn (or on par with the reported net profit). As a result, its dividends would hover around the 8-9% range until 2026 and spike after that on the commissioning of the Russian Far East DPM2 projects, while upside risks are production coming above our expectations (we forecast production moderating 9% in FY21F to the multi-year average).
New go-to stock in utilities. Despite the 40% share price growth throughout 2020, we believe this rally still has legs. RusHydro screens favourably versus peers: it delivers a sustainable above-market yield, holds substantial long-term growth potential, runs an optimal capital structure, and its dividend policy is both established and accepted by the regulator and shareholders. The company requires an upgrade of its ESG profile: despite its name, RusHydro receives about 30% of revenues from coal-related assets. We incorporate our latest assumptions, including for subsidies, costs and capex. We increase our 12-month Target Price 9% to RUB1.00, reiterating our Buy recommendation with an ETR of 34%.
Unipro published 4Q20 IFRS financials on 4 March and holds a conference call. Falling electricity output (-12% y/y) together with worsening electricity spot market dynamics in 4Q20 to lead EBITDA decrease by 10% y/y and net income to be down by 37% y/y, partly due to higher financials expenses. EBITDA guidance for 2021 at Rb25-30bn, for 2022 at Rb33-37bn (BCSe are Rb29bn and Rb31.3bn respectively – positive risk for 2022e). Berezovskaya GRES 3rd block update: can start receive capacity payment in April 2021; the
173 RUSSIA Country Report April 2021 www.intellinews.com