Rusal - Support from Nornickel Dividends Despite Weak Aluminum Market
We cut our 2019 and 2020 EBITDA estimates for Rusal to a respective $1.0 bln and $0.9 bln, seeing limited upside for aluminum prices from spot levels given the slowing global economy, US-China standoff and lack of cost support due to sliding raw material prices and a weakening yuan. While the aluminum business is providing only marginal value in the current macro environment, we note the Nornickel dividend flow of above $1.3 bln per year may ensure a relatively rapid deleveraging, which should gradually drive the equity value higher. We lower our target price to $0.52 (HKD4.07) per share but reiterate our BUY recommendation on the stock.
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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