Rusal - Returning to Normality
Following a challenging 2018, Rusal is now getting back to business as usual while ensuring compliance with OFAC requirements. At spot commodity prices, Rusal is trading in line with its historical multiples. However, we think that aluminum is likely to rebound slightly this year in response to ongoing capacity cuts in China, which, coupled with what is expected to be strong dividend flow from Norilsk Nickel, make the valuation look more attractive. We see the company trading at a 19% FCF yield in 2019, adjusted for a one-off working capital release. We reinstate coverage of Rusal with a BUY recommendation and a target price of HKD4.46 per share.
United Company Rusal is a producer of aluminium and alloys. Co.'s production chain include bauxite and nepheline ore mines, alumina refineries, aluminium smelters and casting houses, foil mills and packaging production centres. Co. operates in four reportable segments: Aluminium, which is involved in the production and sale of primary aluminium; Alumina, which involved in the mining and refining of bauxite into alumina and the sale of alumina; Energy, which include the mining and sale of coal and the generation and transmission of electricity; Mining and Metals, which includes the equity investment in Co.'s joint venture, PJSC MMC Norilsk Nickel.
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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