Norilsk Nickel: Nickel bull market on Indonesian ore ban (upgraded to BUY)
With the Indonesian government planning to accelerate a ban on raw ore exports to the end of 2019, vs. 2022 previously, the news has shocked the nickel market, with prices up c.50% since June. With the potential to remove nearly 10% of global supply almost overnight, the nickel market will move into a large deficit, in our view, justifying high prices close to current spot in the next couple of years, before processing capacity catches up. Beyond 2022, EV demand should support nickel prices. With palladium also in a large deficit, Norilsk should remain a high dividend payer (11.5-12.3% yields in 2019-23E, on our estimates). Despite the rising capex, the balance sheet should remain under control. With 37% growth in the EBITDA vs. 2018 by the time the South Cluster and Talnakh projects are complete, we believe that 11-12% dividend yields should be achievable in the long term, justifying our upgrade to BUY and the 42% increase in our price target (PT), to USD 28.6/GDR.
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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