Page 87 - RusRPTMar19

Aton top stock picks for 2H17, drivers
Company Ticker TP Upside Key drivers potential
Sberbank SBER RX RUB210 43% The bank trades at a 2017 P/E of 5.0x and P/BV of 1.0, which is well below EM peers. It enjoys high and sustainable ROE above
20%. Dividend payout ratio can be increased after 2017. Best liquidity in the market and strong corporate governance.
Alrosa
ALRS RX
RUB125 43%
Trades at 4.7x 2017 EV/EBITDA, offering a discount to global diversified miners (5.3x) and Norilsk Nickel (6.6x). Recent stock underperformance caused by sanction concerns (Alrosa is a state- owned company) is unjustified, in our view. We expect the stock to be supported by strong summer monthly sales as well as its FY16 dividends (10% yield). Alrosa generates strong FCF yielding 15% and has low debt of 0.6x.
Unipro UPRO RUB3.55 41% Turnaround story: we expect bright 2017 earnings with further
RX momentum supported by the Berezovskaya unit’s relaunch. One of
the best high-conviction dividend plays in the sector.
TCS Group
TCS LI
$15.2/GD 35% R
Management guides for 25-30% EPS growth in 2017, the highest in the sector. Strong 1Q17 IFRS results suggest the bank is on track to reach its FY guidance. Dividend policy assumes a 50% payout ratio from IFRS net income on a quarterly basis. The stock trades at a P/E of 9.0x, high compared to peers, but for this reason the bank operates at the highest ROE in the sector (40%+).
Etalon
ETLN LI
$4.7/GDR 32%
This year should be a strong for the company in terms of earnings growth: we expect EBITDA and EPS to increase by 53% and 50%, respectively, driven by falling inventories from built flats. The share of more value-added projects in Moscow has increased to 50% of total portfolio, which in turn should lead to better margins. Finally, debt burden is the lowest vs other developers, allowing Etalon to boost its dividends. We believe Etalon’s dividend yield may reach 9% for 2017, overtaking LSR Group.
87 RUSSIA Country Report March 2019 www.intellinews.com