Page 181 - RusRPTApr23

Dividend outlook for 2023e is improving. Our 2023e-2024e DPS forecasts increase noticeably as both our production and realized price assumptions rise. Our full-year 2023e DPS forecast rises 63% to Rb34/sh (c9% DY), while our 2024e DPS jumps 45% to Rb61/sh (c16% DY).
Higher sanctions risks. Rosneft is Russia’s state-owned oil champion that has a high-profile role in the Russian economy, and so efforts to enforce oil embargoes and price ceilings may fall disproportionately on the company.
General oil price and ruble risks. All Russian oil companies benefit from higher oil price levels and a weaker ruble. To the extent the former falls and the latter rises, our Rosneft earnings and dividend expectations would fall.
Higher dividends, improved 2023e outlook. The improvements in our 2022e-2024e earnings and DPS forecasts come from improved estimates of oil realizations vs posted Urals prices, a weaker ruble, and model tweaks after the partial release of ’22 IFRS results. We are modestly more optimistic than consensus for 2022e, more pessimistic on 2023e, and much more optimistic on 2024e, possibly due to more favorable macro or production assumptions.
TP rises on weaker ruble, maintain Hold. Our DDM-based TP for ROSN rises 31% to Rb470/sh on a weaker ruble and higher dividend forecasts. We maintain our rating at HOLD, which is supported by merely adequate dividend yield expectations for 2023e of Rb34/sh (c9% DY.)
● Novatek
Novatek’s declared dividend of Rb60.58/sh was below our most recent forecast of Rb65/sh. But, when added to the interim dividend of Rb45/sh, the full-year payout of Rb105.6/sh was within 4% of our expectation. Assuming the company paid its approved minimum 50% of adjusted net income, this strongly implies our model is largely working, despite the lack of interim or full-year IFRS results against which to benchmark it. Note that our DDM-based Target Price of Rb1,400/sh for Buy-rated NVTK is predicated on substantial, continued growth of earnings and dividends based on the company being able to achieve most of its ambitious LNG growth projects. In the context of a growth-oriented company, a full-year DY of c10% is attractive.
BCS TP on gas producer Novatek rises 7% to Rb1,500/sh, and BCS maintain our rating at BUY. This comes despite a material downgrade in our 2023e and 2024e expectations following the collapse of European gas prices.
Arctic Cascade may provide the key to LNG growth. We see more challenges for the Russian gas industry in the L-T than we do for its oil industry. The loss of access to foreign liquefaction technology was a blow to Novatek’s ambitious LNG growth plans, but we think its own Arctic Cascade technology may serve as a locally sourced alternative (see Upgrade).
181 RUSSIA Country Report Russia April 2023 www.intellinews.com