Alrosa - 2Q19 Trading Update Weak, Downgraded to Sell
Alrosa released a weak 2Q19 trading update, which showed a decline in sales volumes, almost no improvement in the average gem-quality realized price and, hence, only a modest recovery in the sales mix. We expect a weak set of financial results for the quarter, with EBITDA down 25% Q-o-Q to $360 mln and leveraged FCF of just $25 mln. We have cut our forecasts for realized gem-quality diamond prices by around 15% and slightly reduced our 2019 and 2020 sales volumes projections, thus materially lowering our financial estimates. We downgrade our target price to R70 per share and our recommendation from HOLD to SELL.AK Alrosa PAO. AK Alrosa PAO (Aktsionernaya kompaniya ALROSA PAO or ALROSA Company PJSC), formerly AK Alrosa OAO, is a Russia-based company which is principally engaged in the exploration, mining, manufacture and sales of diamonds. Its operations include five Integrated Mining and Processing Complexes: Mirny, Udachny, Aikhal, Anabar and Nyurba located in the Sakha Republic; sorting divisions and diamond cutting and polishing division. The Company is a member of variable diamonds associations. It operates through several representative offices, branches and subsidiaries, including Alrosa-Nyurba OAO, Almazy Anabara OAO and Severalmaz OAO.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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