TMK: Weakness Temporary – BUY Reiterated
TMK shares plunged over 12% after its 2Q17 financials served as a reminder to the market how sensitive its earnings are to rising steel prices and volatile LDP sales volumes, in our view. We believe that China’s steel-price rally is unlikely to be sustainable in the long-run as domestic supply is rising, while TMK’s Russian division’s results should improve in 4Q17 as the company passes higher steel costs onto end-consumers. We see the group’s FY17 EBITDA increasing 13% YoY to $599mn on a turnaround of the American Division. We also expect deleveraging to continue, anticipating YE18 net debt to EBITDA at 3.6x, which should trigger a stock rerating. We reiterate our BUY rating on TMK which trades at 5.7x 2018E EV/EBITDA vs Vallourec at 15.2x and Tenaris at 10.9x, and suggest using the current price weakness as a buying opportunity.
Since its inception in 1991, ATON has built a reputation for combining in-depth local knowledge of the Russian market with the highest international standards in research, sales and trade execution. As a result, we have been able to attract many of the leading domestic and international institutional fund management groups as our clients. As one of the leading independent investment banks in Russia, we offer the full range of institutional brokerage service, including:
- Detailed fundamental analysis of economics, sectors and companies, with the widest coverage universe in Russia and the CIS;
- Timely trading ideas to help clients take advantage from short-term pricing discrepancies;
- Competitive prices and prompt execution of trades;
- An on-line platform providing easy access to all our research products and tools.
- Client-focused Service
- We employ state-of-the art technology to ensure the highest quality of investment services as well as the highest level of data protection.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.