Page 198 - RusRPTApr23

support the investment case.
Business restructuring is on the agenda. Polymetal is actively developing its structure with potential re-domiciliation to the ‘friendly’ jurisdiction (probably, Kazakhstan). After that, the gold producer mulls to split the Russian and non-Russian assets and restore the dividends (end-23).
Re-domiciliation completion and return to the dividends. Polymetal highlighted in the CMD the dividend theme would be actual once the movement to the new jurisdiction to be finished (3-4Q23).
New projects run. New projects such as Amursk POX-2, Prognoz, Kutyn, Veduga, etc. should optimize/increase metals output and, as a result, support profits by 15-20% by 2024-25.
Hawkish Fed policy may squeeze global demand for precious metals. The ongoing implementation of tight monetary policy by the Fed may exert downward pressure on gold and silver prices in the medium term, and it is uncertain which measures will be approved in the future. Despite this uncertainty, the existing gold rate, combined with the weakened, enables gold miners to yield profits.
Weaker, stronger gold rates result in higher profits. Polymetal also has high exposure to FX rate, which weakening coupled with the uptick in gold prices would lead to stronger profits.
TP upgraded on optimistic macro forecasts. Our DCF-based TP for POLY grew 52% to RUB760/sh vs RUB500/sh. As a result, the stock has 37% upside potential and HOLD recommendation.
BCS have revisited Alrosa’s case and now have a Hold recommendation
with 23% increase in TP to RUB70/Sh. BCS believe that low-levered Russian diamond giant has a potential to navigate through rising geopolitics-related pressure and wider sanctions risk as the company remains critical for the global diamond industry, historically supplying every third diamond in the world.
Lack of transparency limits upside. Low transparency along with the muted signals from US jewelry and falling Indian rough diamond imports complicate the analysis, yet robust Chinese performance expected in 2023 translates into a Hold recommendation..
Higher reporting and information transparency. Alrosa’s return to its previous operational and financial disclosure standards will support transparency for the name and may translate in stock price growth.
BCS believe the company has sufficient capacity to pay dividends, but its timeline is unclear given lack of transparency
198 RUSSIA Country Report Russia April 2023 www.intellinews.com