MMK - 3Q19 IFRS Results In Line; Domestic Premiums Slow to Fade
MMK's 3Q19 financial results fell in line with our and consensus estimates. The company guides a 6% Q-o-Q decrease in sales volumes in 4Q19 and expects just a small decrease in the Russian domestic HRC price premium over the export benchmark. The latter could prove to be the case in the short term given the ongoing supply cuts in Russia (owing to overhauls of blast furnaces and HRC mills), which in turn may support the average realized prices of MMK (and Severstal) thanks to relatively high domestic exposure (compared with NLMK). At spot steel and bulks prices and the current USD/RUB rate, MMK is trading at a 2020E LFCF yield of around 8% and dividend yield (for dividends to be paid in 2020) of 9%.
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.
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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