Alrosa: Supply deficit – the key trigger for a re-rating (BUY - transfer of coverage)
We transfer coverage of Alrosa with a BUY recommendation and a price target (PT) of RUB 177/share. The company’s strong asset base and the anticipated increase in rough diamond prices throughout 2022E should allow for a dividend yield of 12.4%, on our estimates. The recovery of the diamond market post the COVID-19 pandemic is not finished, in our view, and rough prices have material upside, on the back of firm demand, the structural supply deficit, and the limited inventories in both the midstream and among producers. Alrosa’s financial performance should also be supported by the output growth in both the medium and long term. In addition, the company’s outstanding ESG positioning among its Russian and global metals & mining (M&M) peers, although not a material factor driving the valuation currently, is likely to become more important in the next couple of years, in our view.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.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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