RusHydro - Record DPS Despite Impairments

We have adjusted our financial model for RusHydro, incorporating both the 3Q20 results and management guidance for capex. Our bottom-line forecast for 2020 increased from R34.4 bln to R55. 7 bln on the back of the lower impairments guided by the management versus our previous estimates and also thanks to a stronger positive impact from the revaluation of a forward contract. We now believe that even with no adjustments for impairments, RusHydro should be able to pay out what would be a record DPS of R0.06 even though it will record substantial impairments. We have slightly adjusted our 12m DCF-based target price to R1.01 and reiterate our BUY recommendation.> Impairments below our initial estimate. The management guided for R20 bln of impairments in the 2020 IFRS results. We had expected higher impairments, at more than R28 bln. This has improved the outlook for the 2020 bottom line.> Additional tailwind from forward contract revaluation. Our current forecast did not incorporate the effect of the revaluation of the forward contract with VTB. Given that the impact of this on the 9m20 results was R11.8 bln, and given that the share price is now quite close to where it was at the end of 3Q20, we incorporate a similar non-cash positive impact in our full-year 2020 net income forecast.> Forecasts revised upward, leading to higher DPS to be paid in 2021. We have also adjusted our model assumptions to reflect the trends observed in the 9m20 results. We slightly raised our 2020 EBITDA forecast (up 4% to R114.5 bln) and made a substantial revision to the bottom-line forecast (up 62% to R55.7 bln). We now expect RusHydro to pay a record DPS of R0.063, for a yield of 8.2% in 2021, from the 2020 results.> BUY reiterated. We have slightly increased our DCF-based 12m target price to R1.01 and reiterate our BUY recommendation for the stock.