Polymetal - Operations Strong, But Still a HOLD
Polymetal's EBITDA came in at $305 mln (up 19% y-o-y) in 1H18, about in line with the consensus, which had become more conservative following the 2Q18 trading update. Assuming the gold price and USD/RUB remain flat until year end, we expect EBITDA of $780 mln this year, versus the consensus of around $800 mln, and LFCF of $160 mln (for a 4% yield). While we appreciate Polymetal's stellar operational performance and expect the full ramp-up of Kyzyl to be a success, we fail to see the advantage of gold stocks versus steel names and Alrosa, which boast much more attractive yields (10-12% and higher). We thus reiterate our HOLD recommendation on Polymetal and suggest retaining exposure to gold stocks only as a hedge against potential global shocks.Polymetal International is the ultimate parent entity of Polymetal Group, a precious metals mining group operating in Russia, Kazakhstan and Armenia. Co. has five reportable segments: Magadan; Ural; Khabarovsk; Kazakhstan; and Armenia. Each segment is engaged in gold, silver or copper mining and related activities, including exploration, extraction, processing and reclamation.
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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