Alrosa - Tactical Trade Idea Closed, 12m TP of R70 and SELL Reiterated
We downgrade our 2019-20 financial forecasts to account for recently weak sales results and ongoing rough diamond price erosion. Our 2019 and 2020 EBITDA forecasts are now a respective 9% and 17% below the consensus. The slight m-o-m pickup in sales in August and the approaching ex-dividend date on October 11, along with the CEO's comments about a potential market recovery this year, have recently helped the stock to pick up a bit. While we admit that we are likely to see seasonal m-o-m sales growth in September-October, rough and polished diamond benchmark prices continue to slide and there are no signs of a recovery in the end market yet. We thus think that any positive sentiment is likely to prove short-lived. To be on the safe side during the autumn season, we close our tactical short sell trade idea, but we keep our SELL recommendation with our 12-month target price of R70 per share.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.
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