Alrosa: Cutting our PT on weaker guidance (stays BUY)
Despite its solid 4Q19 financial results, including stronger-than-expected FCF, we have cut our price target (PT) by 15% to RUB 83.9/share, due to the higher capex, lower sales volumes guidance for 2020E and potentially weaker prices because of the coronavirus. We expect the coronavirus to be a 2020 phenomenon and we believe the negative impact has been priced into the shares already. Falling supply, solid medium-term demand and normalised midstream financing conditions should support diamond prices in the medium term, in our view. Following the recent share price correction, we see this as an attractive entry point. Short-term negative news regarding global growth could hurt diamond demand further and Alrosa’s share price, but we believe the stock is likely to trade higher than the current levels in the next year. We maintain our BUY rating on the stock.AK Alrosa PAO. AK Alrosa PAO (Aktsionernaya kompaniya ALROSA PAO or ALROSA Company PJSC), formerly AK Alrosa OAO, is a Russia-based company which is principally engaged in the exploration, mining, manufacture and sales of diamonds. Its operations include five Integrated Mining and Processing Complexes: Mirny, Udachny, Aikhal, Anabar and Nyurba located in the Sakha Republic; sorting divisions and diamond cutting and polishing division. The Company is a member of variable diamonds associations. It operates through several representative offices, branches and subsidiaries, including Alrosa-Nyurba OAO, Almazy Anabara OAO and Severalmaz OAO.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
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