Inter RAO confirmed at BUY, TP RUB 7 - Triggers running late but current valuation still very alluring
We confirm our BUY recommendation, noting that the stock is still one of the cheapest in the sector (1x EV/EBITDA 20e incl. the treasury stake and around 2.5x excluding it vs the MSCI average of > 4x) even after accounting for this years negative effects on electricity prices, production and exports, which have lowered our DCF target price to RUB 7 from RUB 7.6. Currently, we include all of the non-priced in cash pile (to reach 50% of Market Cap or more by end-2020e) in our DCF model, the revaluation of which we see as the main driver for the stock, to be triggered by announcements of possible investments funded by the cash valued by the market at zero. Given the COVID-19-driven stock market crash, we believe that M&A activity could take time to recover, yet the company could still share some strategic M&A insight in the new Strategy in Aug-Sep. Nevertheless, we currently expect more tangible triggers to come after the Strategy Update (not sooner than end-2020e-early 2021e) but their significance is not to be underestimated. Among them we note the decision on the Kaliningrad power plants and the details on the construction of the new 2.5GW capacities for the Vostok Oil project, let alone the possible purchase of Unipro, which together could easily use up all of the non-priced in cash and translate to an upside of >50%.Inter RAO UES PJSC is a functioning operator of electricity exports and imports in the territory of Russia. Co. represents the interests of two Russian power sector participants: RAO UES of Russia and Rosenergoatom concern, which possess 60 and 40% of the shares respectively. Co. is engaged in arranging transboundary electricity supplies, to provide both domestic and foreign consumers with electric power. Co. is also engaged in pursuing effective investment activities. Co. is developing several areas of activity, including: electric power export and import supplies; electricity sales in home and foreign markets; investment activities; and foreign asset management.
The Institutional Equity Research team of Raiffeisen Bank International AG covers 85 stocks from Austria, Central & Eastern Europe with sell-side research and thus levers our local broker status with excellent company relationships. For corporates in Austria, CEE and Western Europe, we offer co-sponsored research, which includes research coverage and marketing activities to investors. Additionally, through our Spotlight Research product we also shed light on leading European small and micro-caps, seeking greater visibility with investors.
The Institutional Equity Research team consists of roughly 15 analysts, both in Vienna and the CEE countries. Our analysts provide long-standing sector expertise in tandem with profound local market know how and a sectoral approach across the entire region.
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.