ALROSA: Cheap Valuation Insufficient – Downgrade to HOLD

We downgrade ALROSA to HOLD, cutting our target price to RUB85/share. We believe that its cheap valuation (4.4x 2017 EBITDA) alone is insufficient to offset the polishing industry’s challenges, and uncertainty regarding the Mir mine and its $15bn of reserves. We see no strong catalysts, while subdued sales in September and October, as per ALROSA’s guidance, can only be partially explained by an early Diwali, in our view. Jewellery demand is showing signs of a modest recovery, but without convict...