Gazprom 3Q 20 - 9M 2020 contributed over RUB 5 to DPS for 2020e

Today, Gazprom published its 3Q 20 results, which turned out to be close to both our estimates and consensus on revenue, while exceeding the expectations on EBITDA. Notably, we believe the main difference in EBITDA compared to both our and market estimates was driven by higher than expected FX gain on operating items (USD 1.4 bn). At the same time, the companys 3Q 20 net income came in weaker vs consensus estimates due to higher FX losses. However, the latter were lower compared to our prediction, leading to stronger results on bottom line vs our forecast. Despite stronger than projected EBITDA and lower than expected income tax paid, Gazproms 3Q 20 net operating cash flow was weaker than our estimates pressed by significant negative impact from changes in WC (USD 3.6 bn, adjusted on changes in ST deposits). Apart from that, the companys capital expenditures also came in slightly above our forecast, cumulatively leading to free cash flow being weaker than our projections. Anyway, we treat the results as neutral, since the FCF was negative as expected. We should also note that based on reported results, we estimate Gazproms 9M 20 adjusted net profit at USD 4.3 bn, which should contribute about RUB 5.4 to 2020e DPS, coming broadly in line with our FY 20e DPS estimates of RUB 7.7.