Nornickel - 2020-22 Dividend Targets Kept, Better Long-Term Growth Profile
Nornickel held an investor day on Monday. The dividend targets for 2020-22 were reiterated, meaning that marked to market the stock is likely to retain the highest dividend yields in the Russian M&M space over this period. Growth plans starting in 2025 were upgraded - this will entail higher capex, but can deliver decent IRRs of 20-30%, we estimate. We incorporate updated production and capex guidance, which result in almost unchanged 2019-20 EBITDA forecasts but higher 2019 LFCF estimate by 25% on lower capex. At spot commodity prices and current USD/RUB, the stock is trading at a 2020E EV/EBITDA of 6.0, 2020E LFCF yield of 9.0% and dividend yield (to be paid in 2020) of 11.5%. As our valuation is based on 2020 EBITDA, we keep our target price of $28.90 per GDR and BUY recommendation unchanged. We expect a 19% next 12-months total return.MMC Norilsk Nickel PJSC is a global producer of nickel, palladium, platinum and copper. Co. also produces by-products, such as cobalt, chromium, rhodium, silver, gold, iridium, ruthenium, selenium, tellurium and sulfur. Co. is involved in prospecting, exploration, extraction, refining and metallurgical processing of minerals, as well as in production, marketing and sale of base and precious metals. Co.'s production facilities are located in five countries: Russia, Australia, Botswana, Finland, and South Africa. Co.'s production units are integrated and include: the Polar Division (the Taimyr Peninsula); and the Kola Mining and Metallurgical Company (Kola MMC or the Kola Peninsula).
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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