Norilsk Nickel - Short-Term Output Targets Raised, Dividend Yield Still Attractive

The updated guidance provided at Norilsk Nickel's investor day this week features a 3.5-7.0% uptick in projected metals production from the core assets in 2019-20. This is thanks to an operating efficiency program. The updated capex guidance for 2019-20 is virtually in line with the previous targets, while the guidance for 2018 has been cut by 15%. The company is considering expansion projects that would add 15-25% to its current production volumes while retaining decent dividend yields above 10% during the peak capex period, according to our calculations. We have updated our model to take account of the new short-term production and medium-term capex targets. We raise our target price to $22.20 and reiterate our BUY recommendation.