WOOD Flash – Tatneft: 4Q18E results expectations – focusing on costs, FCF and dividends (due out tomorrow)
We expect Tatneft’s 4Q18E IFRS results (due out tomorrow, 29 March) to be materially weaker qoq, due to the oil price correction during the period; however, the actual reported results will have little impact on our investment thesis as the oil price has recovered swiftly this year. Besides this, the company launched the production of gasoline this year, which should contribute to its organic growth, in addition to increasing its high-margin bitumen production. We see c.27% upside for Tatneft’s preferred shares (BUY, RUB 700 price target (PT)) and expect a c.11% dividend yield (on the back of the FY19E results). Its GDRs, which trade at a 38% premium to the preferred shares, offer less upside, in our view, due mainly to valuation and a lower dividend yield (8%); hence, we rate the GDRs a HOLD, with a USD 80 PT.
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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