Gazprom Neft confirmed at BUY, TP RUB 527 - Low oil prices do not prevent yields from being alluring

We treat current levels as appealing for entering the stock as we believe that even in the current environment of low crude oil prices, Gazprom Neft could offer attractive dividend yields thanks to the growth in crude oil production and substantial tax benefits provided by its Arctic projects. According to our estimates, the company is capable of increasing oil output at the main preferential Arctic production fields by almost 20% or 2.2 mn tonnes over 2020e-22e, while total consolidated oil output is expected to gain almost 3 mn tonnes and reach 52 mn tonnes by 2022e. We also believe that the projects mentioned could bring over USD 5.2 bn to the companys EBITDA in the form of tax preferences on export duty and mineral extraction tax (MET) for 2020e-22e. Besides, we expect that due to the drop in oil prices, Gazprom Neft will partially reduce its capital expenditures through a cut in other capex by USD 0.7 bn in 2020e. As a result, we believe these factors alongside the hike in the payout to 50% should help Gazprom Neft offer a dividend yield of over 35% in total for the next three years. Overall, we confirmed our BUY recommendation for all types of shares. We have cut our DCF-based TP for depository receipts to USD 33.4 (from USD 38.1), but increased TP for local shares to RUB 527 (from RUB 495) due to rouble depreciation.