Page 65 - Russia OUTLOOK 2022

• ECM
Russian stocks have demonstrated an impressive performance in 2021, with the RTS index delivering 27% in total return terms YTD, the best result among the liquid markets.
The RTS fell 19% in a big drawdown in November-December 2021 due to new geopolitical tensions after hitting a ten year peak of 1920 at the end of October. However, the index is expected to recover strongly in 2022 with a 41% upside from December depressed levels.
Valuations are low and the upside potential considerable. Valuations are quite undemanding, with forward P/E of 6x and a dividend yield of 9,5% as of December 2021. This dividend yield is expected to rise to 10.2% for 2023, according to BCS GM, which gives a combined yield of over 20% in the next 18 months.
Following a strong cyclical recovery in earnings, the RTS’ 2021 P/E multiple fell back to 5.8x, which is 19% lower than the 5Y average of 7.1x. The aggregate 2022e P/E expected to shrink to 4.9x says BCS GM.
The aggregate USD-based net income in 2022 is expected to rise by 17%, thanks primarily to the ongoing earnings rebound in the energy sector. Among the index heavyweights, analysts expect the largest positive contributions from Lukoil and SurgutNG, followed by TCS, Gazprom and Rosneft.
BCS GM was one of many that set the 2022 RTS year-end index target at 2,250, up from the 1,600 it was trading at at the close of December and marginally up from the 1,900 peak the RTS hit in October 2021. Renaissance Capital also has a Buy recommendation on Russia for 2022, saying geopolitical tensions will ease and Russia’s strong fundamentals and strong corporate profits mean stocks have a rosy outlook.
65 RUSSIA Russia OUTLOOK 2022 www.intellinews.com