Petropavlovsk confirmed at BUY, TP GBp 27.4 - Monetising operations, piling cash and boosting yield
We reaffirm our BUY recommendation for Petropavlovsks ordinary shares and sharply lift thetarget price to GBp 27.4 from our previous estimate of GBp 14.4. We believe that better-thanexpected
performance of the companys 3 core mines and 3rd party concentrate processing
business is going to translate into strong and steadily growing free cash flow straight from 2019e.
With FCF being marginally positive in 2019e and kicking off at the USD 70 mn level in 2020e
(yield of 8%), we estimate that it will further expand to USD 195 mn in 2021e (yield of 22%) and
reach USD 251 mn in 2022e (yield of 29%). Consequently, a cumulative FCF of USD 6.8 bn
throughout 2020e-2043e (till where our forecast horizon stretches) is expected to make the
company debt-free by 2023e, thus overthrowing the so far persisting perception of Petropavlovsk
as a highly leveraged enterprise not capable of generating sufficient FCF for its equity holders.
Petropavlovsk is engaged in the mining of precious and non-precious metals which require it to hold licences which permit it to explore and mine in particular areas in Russia. Co.'s reportable segments, which are aligned with its operating locations, are Pokrovskiy, Pioneer, Malomir and Albyn hard-rock gold mines which are engaged in gold and silver production as well as field exploration and mine development.
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.
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