Rusagro - Sugar Surplus May Undermine Profitability
A better expected harvest this year has brought down prices of sugar and soft commodities in general. We expect Rusagro to publish weak 3Q19 financials, with a decline in the profitability of the sugar segment, and see margins remaining depressed into next year. We have cut our 2019 EBITDA forecast by 12% to reflect lower profitability in both the sugar and the oil and fat segments. Note that this does not include the 1H19 profit generated by Solnechnye Produkty assets. This dropped our target price to $12.00 per GDR, yet we keep our recommendation at HOLD. We like the company's fundamentals, but think the stock is fairly priced at the moment.Ros Agro, through its subsidiaries, is engaged in agricultural production, cultivation of pigs, processing of raw sugar and production of sugar from sugarbeet, vegetable oil production and processing. Co. and its subsidiaries are organised on the basis of four segments: Sugar, which is engaged in the production and trading operation with white sugar; Meat, which is engaged in the cultivation of pigs and selling of consumable livestock to third parties; Other agriculture, which is engaged in the cultivation of plant crops and dairy cattle livestock; as well as Oil, which is engaged in vegetable oil extraction, production and sales of mayonnaise, consumer margarine, and bottled vegetable oil.
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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