Alrosa - Digging Into the Lab-Grown Market
Technological advances in recent years have made it possible to not only manufacture gem-quality diamonds at costs comparable to those of natural ones, but also to produce larger stones. While the costs of lab-grown diamond production may continue to fall, such stones already offer a compelling value for size, and there is no way to detect the difference without special equipment. We refrain from making predictions about how consumer preferences will evolve, but to account for the structural risks to Alrosa, we reduce our target 2019E EV/EBITDA to 5.0, which implies a target price of R103 per share. We downgrade our recommendation from BUY to HOLD.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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