Page 199 - RusRPTApr23

Dividends at risk in short-term. RUB19bn MET hike in 1Q23 is one-off measure, though adds risk to dividends in the short-term, we estimate.
US diamond market performance. Diamond indicators are mixed in the US (due to high 2021 base) and the sentiment varies across the regions. The largest diamond jewelry market, the US, may be hit in 2023 by customers’ weak sentiment on high inflation or recession expectations and/or further shift to lab-grown diamonds.
Consumer preferences shift. Natural diamonds market is exposed to various risks such as post-lockdown shift to experiences (including travel) from goods as well as market cannibalization from lab-grown diamonds and branded luxury goods.
Financials revised up on higher prices and weaker. We increased financial estimates in our model primarily due to new macro assumptions, as well as stronger demand for diamond jewelry in Asia.
TP upped by 23%, resulting in HOLD. Our DCF-based TP for ALRS jumped 23% to RUB70/sh vs RUB57/sh with 10% upside prospects.
9.2.12 Mines and Minerals - steel & iron
BCS reiterate BUY recommendation for Severstal, its top pick, and revised its TP up by 7% to Rb1,600/sh. BCS expect Russian steel prices to narrow the gap with global benchmarks, which should stay strong on Chinese economy acceleration. Weak ruble and start of construction season in Russia are also support factors.
Local steel market is on the rise, backed up by strong global benchmarks. The Russian construction sector is poised for a busy high season, while Turkey continues to recover from a devastating earthquake and the Chinese economy is experiencing acceleration. These factors are strong drivers for growth. In 2022, Severstal sold more than 80% of its steel products domestically, but Russian steel prices have yet to rise sufficiently to catch up with global benchmarks. BCS expect Severstal to resume dividends in the medium-term.
Strong seasonal momentum in domestic demand. HRC and rebar prices already increased (+8% and +24% for the last 3 months) but discount to export parity stays at around 15-20%. Construction season is starting and should support further upward price revision in both flats and longs.
Chinese economy acceleration. China’s GDP grew by 3% in 2022, while the government targets 5% for 2023, possibly supported by stimuli. Strong Chinese performance will translate to robust industrial and construction activity and should support current steel prices at or above current levels.
199 RUSSIA Country Report Russia April 2023 www.intellinews.com