NLMK - 2Q19 Trading Update Review and Earnings Preview
NLMK has published a 2Q19 trading update that generally met our expectations. We see 2Q19 EBITDA at $710 mln (up 2% Q-o-Q) and leveraged FCF at $260 mln (for a 1.8% yield), with the latter somewhat pressured by higher capex Q-o-Q and a working capital buildup. We believe NLMK could start paying more than 100% of its FCF this quarter (in line with its updated dividend policy), so we expect a dividend of $260-300 mln, for an around 2% yield. At spot prices and the current USD/RUB rate, NLMK is trading at a 2020E LFCF yield of 8% and an 11% dividend yield. We reiterate our HOLD recommendation. NLMK will report its 2Q19 financials on July 26.
Novolipetsk Steel is a vertically integrated steel manufacturing and production group based in Russia. Co. specializes in the manufacturing of high-quality hot and cold rolled steel in a variety of grades and sizes. Co. is also engaged in production and sales of flat steel products including slabs, hot rolled and cold rolled sheet, electrical steel, galvanized steel, cold rolled sheet with polymeric coatings. In addition, Co.'s areas of manufacturing include sintering, coke production, blast furnace production, steel-making, hot and cold-rolled flat steel production, galvanized and prepainted steel production. Co. exports its products to 70 countries around the world.
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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