Report
Alexey Kirichok ...
  • Irina Lapshina

MMK - 1Q19 Trading Update: Weak Volumes, Strong Sales Mix

MMK released a quite neutral 1Q19 trading update today. Steel sales volume dynamics were weak, but the product mix and price performance were surprisingly strong. We expect its 1Q19 EBITDA to decrease some 20% Q-o-Q, while leveraged FCF should be supported by lower capex spending and a working capital release. We forecast leveraged FCF in 1Q19 at around $250 mln for a 3% yield and believe that MMK will continue paying out 100% of FCF in dividends. At spot steel prices and the current USD/RUB rate, MMK is trading at around a 9% 2019 dividend yield, which makes its valuation a bit more expensive compared to Russian flat producers. We reiterate our HOLD recommendation.
Underlyings
Magnitogorsk Iron & Steel Works (GDR)

Magnitogorsk Iron & Steel Works PJSC

Magnitogorskiy Metallurgicheskiy Kombinat PAO, formerly Magnitogorskiy metallurgicheskiy kombinat OAO, is a Russia-based company, active in the steel industry. Its main products are sinter, coke, iron, crude steel, rolled products and ore materials. The Company offers a wide range of products such as wire rod, rebars, square bars, strips, round bars, among others. It is also involved in the coal ore mining, processing of ore materials, sale of ferrous metal products and others. Magnitogorskiy metallurgicheskiy kombinat OAO operates as a supplier for such industries as: pipelines, vehicles, railway, construction and shipbuilding, among others. Its subsidiaries include Lys'venskaya Metallurgicheskaya Kompaniya OOO, among others. The Company operates domestically, as well as exports its products to the Commonwealth of Independent States (CIS) countries, Asia, the Middle East and Europe.

Provider
Sberbank
Sberbank

​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.

Analysts
Alexey Kirichok

Irina Lapshina

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