Nornickel - Nickel Price Upgraded, BUY Reiterated
Indonesia's reintroduction of a ban on exports of low-grade nickel ore starting in 2020, two years earlier than initially planned, should increase the market deficit in 2020-21. While a potentially accelerated ramp-up of nickel production in Indonesia will ease supply pressures in 2021, the pace of EV penetration may surprise on the upside and support nickel prices going forward. Having increased our 2020-21 nickel price assumption to $16,500/tonne, we upgrade our earnings forecast for Nornickel, with 2019 and 2020 EBITDA now at a respective 6% and 18% above the consensus. We see the stock trading at an undemanding EV/EBITDA 2020E of 5.5 and 13% yield on dividends to be paid in 2020E. We raise our target price to $28.90 per GDR and estimate the next 12-month total return at 29%. We reiterate our BUY rating.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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