KazMunayGas: crude headwinds (downgraded to HOLD)
We have downgraded KazMunayGas (KMG) to HOLD, with a new price target (PT) of KZT 22,300 (from KZT 15,100), offering upside of 0.5%. After a sustained rally, we believe the upside is adequately priced in. KMG is a company with a long reserve life and a pipeline of projects to maintain those reserves, making it attractive in the long term. We see it benefiting from any longer-term oil price recovery, but expect prices to remain around USD 75/bbl for the coming year. KMG is investing in chemicals, which provides poor returns in the short term, although refining is much more profitable. KMG and its partners have been in an in an arbitration battle with the Kazakh government, related to the Kashagan and Karachaganak oilfields, where KMG’s share of any penalties could equal its entire market cap, in the unlikely worst case. The average dividend yield is c.6.5% for 2025-27E, which is not very exciting given interest rates in Kazakhstan. KMG trades at 9.3x P/E for 2025E and 5.0x for 2027E, on our forecasts, while the EV/EBITDA is 5.6x for 2025E and 3.4x for 2027E, below many of its peers, but above historic averages.
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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