vk.com/id446425943
Russia
Electric Utilities
13 November 2018
Unipro, ord. (UPRO RX, RUB)
Buy (28 Feb 2018, 05:02 UTC)
Previous: Hold (17 Mar 2017, 11:03 UTC)
Target price, 12mo: 3.16
Last price: 2.78 (12 Nov 2018, close)
Expected total return: 22%
Upside, 12mo: 14%
DY, next 12mo: 8.0%
Share price performance, 12-mo
3 |
|
|
|
|
10% |
2.9 |
|
|
|
|
5% |
2.8 |
|
|
|
|
0% |
2.7 |
|
|
|
|
-5% |
2.6 |
|
|
|
|
-10% |
2.5 |
|
|
|
|
-15% |
2.4 |
|
|
|
|
-20% |
2.3 |
|
|
|
|
-25% |
Nov |
Jan |
Mar |
May |
Jul |
Sep |
UPRO RX, RUB, lhs
Relative to MOEX Index, %, rhs
Equities |
|
1M |
3M |
12M |
3Y |
|
Price |
-4% |
4% |
-10% |
-12% |
|
|
|
|
|||||
|
Price relative |
-3% |
-1% |
-18% |
-36% |
|
|
ADTV (USD mn) |
0.79 |
0.65 |
0.93 |
1.12 |
|
|
Key financial highlights |
|
|
|
|
|
|
Fiscal year end |
12/17 |
12/18F |
12/19F |
12/20F |
|
|
P/E, x |
4.8x |
12.0x |
9.6x |
6.0x |
|
|
EV/EBITDA, x |
3.3x |
6.7x |
5.6x |
3.7x |
|
|
P/B, x |
1.4x |
1.5x |
1.5x |
1.4x |
|
|
FCF yield, % |
12.5% |
3.9% |
6.8% |
15.4% |
|
|
DY (ords), % |
8.6% |
8.0% |
8.0% |
15.5% |
|
Change of Target Price
Unipro
3Q18 IFRS; one more year, please
Unipro has released its 9mo18 results. As we had expected they were optically weak. Despite the Berezovskaya project being on track, 2019 looks trigger-less, with the same dividend and broadly flat profits before the spike we expect in 2020. We roll our model into 2019F, adjust forecasts for reported numbers and operational data and derive a new 12-mo TP of RUB 3.16, implying an ETR of 22%; Buy reiterated.
9mo18 IFRS – as expected. Unipro’s 9mo18 results printed slightly below our estimates. Along with a revenue reduction of 2% YoY, to RUB 54,824mn, with the support of the delta DPM, adjusted EBITDA fell 52% YoY (6% below our expectations) or by 1.5%, excluding the effect of insurance. Net income stood at RUB 11,187mn, a 62% YoY reduction (7% below our estimates). The company reported net cash of RUB 8.6bn.
Conference call messages. The key takeaway from management was guidance for yet another year of RUB 14bn of dividend payment, a 12% cumulative dividend yield for UPRO shareholders in the next 13 months (December 2018, July 2019 and December 2019 payments), supporting our positive outlook. Elsewhere, the company was the first of the generators to note that the modernisation auction is unlikely to take place before YE18; its expectations are for 1Q19. Unipro plans to announce its updated dividend policy once this is finalised, as it intends to participate in several projects, with its bid for the first auction to be “published in the near future”. In the meantime, Unipro highlighted the risk of Unit 3 Berezovskaya GRES reopening in 4Q19 rather than 3Q19 due to fire-coating requirements; capex expectations for the plant were, however, maintained.
Investment case intact. The main value driver of Unipro is well known (Unipro – Berezovskaya site visit & case study of 1 October), and while its benefits (a 55%+ EBITDA uplift and double-digit DY in 2020) are clear, there is still the question of when the market will price this in. We see this moment
EPS(ords), RUB
DPS (ord.), RUB
BPS(ords), RUB
as the only trigger for the stock on a 12-month horizon (Russian Utilities – Roadshow feedback; investors are not happy of 26 October). We have updated our model for the released operating and financial data, incorporating our new macro assumptions, and rolled the model forward into 2019F. We conclude that Unipro is unlikely to excite investors in the next 12
0.53 |
0.23 |
0.29 |
0.46 |
months. Its dividend yield (in line with the market average), muted profitability |
|
0.22 |
0.22 |
0.22 |
0.43 |
||
growth prospects, and the Berezovskaya profits will only feed into results in |
|||||
1.80 |
1.81 |
1.88 |
2.02 |
||
|
EBITDA margin, % |
62.0% |
35.3% |
39.5% |
48.2% |
ROE, % |
30% |
13% |
15% |
23% |
Net Debt, RUB mn |
(6,759) |
137 |
2,363 |
(3,813) |
ND/EBITDA, x |
(0.1x) |
0.0x |
0.1x |
(0.1x) |
Net int. cover, x |
245.9x |
37.2x |
27.2x |
33.3x |
Multiples and yields are calculated based on period-average prices where available.
Source: Bloomberg, Company data, VTB Capital Research
2020. We derive a new 12-month Target Price of RUB 3.16, implying an ETR of 22%. Unipro is not the highest upside we have in our coverage, but is in our view the most predictable safe haven in terms of weathering the new investment cycle. Nor does it suffer the corporate governance risks, lack of growth and poor dividend policies that affect the investment cases of other gencos, we argue. Meantime, the 13 months, 12% dividend yield outlook adds to the conviction of our Buy recommendation. The key risks to our investment case are rouble weakness, a lower production outlook with the depressed trend in the last few years, and additional delays in the Berezovskaya commissioning.
Vladimir Sklyar, Equities Analyst
+7 495 589 21 62 // vladimir.sklyar@vtbcapital.com
Anastasia Tikhonova, Equities Analyst
+7 495 660 42 18 // anastasia.tikhonova@vtbcapital.com
Prices cited in the body of this report are as of the last close before, or the close on, 12 Nov 2018 (except where indicated otherwise). VTB Capital analysts update their recommendations periodically as required.
Please refer to the Disclosures section of this report for other important disclosures, including the analyst certification and information as required by EU-MAR. Additional disclosures regarding the subject company(ies) discussed in this report can be found at http://research.vtbcapital.com/ServicePages/Disclosures.aspx.
vk.com/id446425943
Russia
Electric Utilities
VTB Capital Facts & Forecasts
Russia
Electric Utilities
Unipro
Prices as of: 12 November 2018
Ticker |
CCY |
Current |
12mo TP |
Rating |
UPRO RX |
RUB |
2.78 |
3.16 |
Buy |
Share price performance, 12-mo
3 |
10% |
2.8 |
0% |
2.6 |
-10% |
2.4 |
-20% |
2.2 |
-30% |
Nov Jan Mar May Jul Sep
UPRO RX, RUB, lhs
Relative to MOEX Index, %, rhs
Company description
Unipro is a fossil-fuel electricity generator. It is an 83.7% subsidiary of German Uniper which acquired it during the privatization in 2007. The genco controls 10.3 GW of installed capacity, spread across five power plants in various parts of Russia. . Its key assets are the 5.6GW, gasfired Surgutskaya GRES, in the oil and gas-rich Tyumen region, and the 1.6GW, coal-fired Berozovskaya GRES, in Siberia. Both flagship power plants enjoy proximity to fuel sources as well as exposure to industrialised regions. In general, the genco's assets are well positioned in the capacity and spot electricity merit order due to their high fuel efficiency.
Company website
http://www.unipro.energy/en/
Shareholder structure
Free-float
16%
Uniper
84%
Source: Company data, VTB Capital Research
Research team
Vladimir Sklyar / +7 495 589 21 62
Anastasia Tikhonova / +7 495 660 42 18
Unipro
Last model update on: 13 November 2018
|
IFRS |
2016 |
2017 |
2018F |
2019F |
2020F |
|
2021F |
||
|
Company data |
|
|
|
|
|
|
|
|
|
|
Weighted avg # shares, mn |
|
63,049 |
63,049 |
63,049 |
63,049 |
63,049 |
|
63,049 |
|
|
Avg market cap, RUB mn |
173,058 |
162,145 |
175,402 |
175,402 |
175,402 |
175,402 |
|
||
|
EV, RUB mn |
172,861 |
155,385 |
175,538 |
177,764 |
171,588 |
171,678 |
|
||
|
Ratios & analysis |
|
|
|
|
|
|
|
|
|
|
P/E, x |
|
33.5x |
4.8x |
12.0x |
9.6x |
6.0x |
|
6.3x |
|
|
EV/EBITDA, x |
6.1x |
3.3x |
6.7x |
5.6x |
3.7x |
|
3.8x |
||
|
P/B, x |
|
1.8x |
1.4x |
1.5x |
1.5x |
1.4x |
|
1.4x |
|
|
FCF yield, % |
3.8% |
12.5% |
3.9% |
6.8% |
15.4% |
15.5% |
|
||
|
Dividend yield (ords), % |
8.3% |
8.6% |
8.0% |
8.0% |
15.5% |
15.5% |
|
||
|
Dividend yield (prefs), % |
|
|
|
|
|
|
|
|
|
|
EPS(ords), RUB |
0.082 |
0.53 |
0.23 |
0.29 |
0.46 |
0.44 |
|
||
|
CFPS, RUB |
0.37 |
0.53 |
0.36 |
0.43 |
0.60 |
0.60 |
|
||
|
Free CFPS, RUB |
0.11 |
0.32 |
0.11 |
0.19 |
0.43 |
0.43 |
|
||
|
DPS (ords), RUB |
0.23 |
0.22 |
0.22 |
0.22 |
0.43 |
0.43 |
|
||
|
Payout ratio (ords), % |
276.8% |
41.7% |
95.9% |
76.3% |
93.0% |
97.5% |
|
||
|
BPS(ords), RUB |
1.50 |
1.80 |
1.81 |
1.88 |
2.02 |
2.03 |
|
||
|
Revenues growth, % |
|
2% |
-2% |
-3% |
9% |
19% |
|
0% |
|
|
EBITDA, chg |
|
14% |
68% |
-45% |
22% |
45% |
|
-4% |
|
|
EPS growth, % |
|
-63% |
550% |
-57% |
26% |
59% |
|
-4% |
|
|
EBIT margin, % |
28% |
54% |
25% |
29% |
38% |
37% |
|
||
|
EBITDA margin, % |
36.3% |
62.0% |
35.3% |
39.5% |
48.2% |
46.6% |
|
||
|
Net margin, % |
6.6% |
43.9% |
19.7% |
22.7% |
30.4% |
29.2% |
|
||
|
ROE, % |
5.5% |
29.6% |
12.8% |
15.5% |
22.9% |
21.9% |
|
||
|
ROIC, % |
4.4% |
28.4% |
11.4% |
13.9% |
21.7% |
20.5% |
|
||
|
Capex/Revenues, % |
18% |
19% |
22% |
19% |
11% |
11% |
|
||
|
Capex/Depreciation, x |
2.1x |
2.5x |
2.0x |
1.7x |
1.2x |
|
1.1x |
||
|
Net debt/Equity, % |
0% |
-6% |
0% |
2% |
-3% |
-3% |
|
||
|
Net debt/EBITDA, x |
0.0x |
(0.1x) |
0.0x |
0.1x |
(0.1x) |
|
(0.1x) |
||
|
Net interest cover, x |
44.6x |
245.9x |
37.2x |
27.2x |
33.3x |
|
31.7x |
||
|
Income statement summary, RUB mn |
|
|
|
|
|
|
|
|
|
|
Revenues |
78,032 |
76,522 |
73,950 |
80,771 |
96,021 |
95,701 |
|
||
|
Cost of sales |
(70,852) |
(50,767) |
(48,257) |
(49,843) |
(50,811) |
(52,154) |
|
||
|
SG&A and other opexp. |
6,184 |
21,386 |
349 |
1,016 |
1,049 |
1,087 |
|
||
|
EBITDA |
28,301 |
47,466 |
26,126 |
31,944 |
46,259 |
44,634 |
|
||
|
Depreciation & amortization |
|
(6,646) |
(5,954) |
(8,005) |
(8,797) |
(9,417) |
|
(9,562) |
|
|
Operating profit |
6,718 |
41,187 |
18,037 |
23,148 |
36,842 |
35,073 |
|
||
|
EBIT |
|
21,655 |
41,512 |
18,120 |
23,148 |
36,842 |
|
35,073 |
|
|
Net interest income/(exp.) |
355 |
937 |
164 |
(219) |
(382) |
(155) |
|
||
|
Profit before tax |
7,220 |
40,966 |
18,242 |
22,929 |
36,460 |
34,918 |
|
||
|
Income tax |
(2,054) |
(7,360) |
(3,648) |
(4,586) |
(7,292) |
(6,984) |
|
||
|
Net income |
5,167 |
33,605 |
14,593 |
18,343 |
29,168 |
27,934 |
|
||
|
Cash flow statement summary, RUB mn |
|
|
|
|
|
|
|
|
|
|
Cash flow from operations |
|
23,537 |
33,531 |
22,940 |
26,993 |
37,980 |
|
38,110 |
|
|
Working capital changes |
(3,058) |
(3,112) |
215 |
(592) |
(1,256) |
191 |
|
||
|
Capex |
(13,669) |
(14,708) |
(16,000) |
(15,000) |
(10,863) |
(10,863) |
|
||
|
Other investing activities |
621 |
(2,211) |
651 |
631 |
723 |
950 |
|
||
|
Free cash flow |
6,646 |
20,269 |
6,774 |
11,949 |
27,040 |
27,216 |
|
||
|
Dividends paid |
(19,738) |
(14,000) |
(14,000) |
(14,000) |
(20,558) |
(27,182) |
|
||
|
Net change in borrowings |
2,300 |
(2,300) |
7,000 |
6,000 |
- |
- |
|
||
|
Other financing cash flow |
(119) |
(73) |
(487) |
(850) |
(1,105) |
(1,105) |
|
||
|
Movement in cash |
(7,638) |
1,333 |
104 |
3,774 |
6,176 |
(90) |
|
||
|
Balance sheet summary, RUB mn |
|
|
|
|
|
|
|
|
|
|
Cash and equivalents |
1,725 |
3,058 |
3,162 |
6,937 |
13,113 |
13,023 |
|
||
|
PP&E |
96,701 |
106,214 |
114,125 |
120,328 |
121,775 |
123,076 |
|
||
|
Goodwill |
334 |
338 |
338 |
338 |
338 |
338 |
|
||
|
Investments |
780 |
3,701 |
3,701 |
3,701 |
3,701 |
3,701 |
|
||
|
Other assets |
9,599 |
12,709 |
12,231 |
12,724 |
14,064 |
13,762 |
|
||
|
Total assets |
109,139 |
126,020 |
133,556 |
144,027 |
152,990 |
153,900 |
|
||
|
Interest bearing debt |
|
2,308 |
- |
7,000 |
13,000 |
13,000 |
|
13,000 |
|
|
Other liabilities |
|
12,319 |
12,472 |
12,415 |
12,544 |
12,897 |
|
13,054 |
|
|
Total liabilities |
|
14,626 |
12,472 |
19,415 |
25,544 |
25,897 |
|
26,054 |
|
|
Total shareholder's equity |
94,311 |
113,547 |
114,141 |
118,484 |
127,093 |
127,846 |
|
||
|
Minority interest |
201 |
- |
- |
- |
- |
- |
|
||
|
Net working capital |
2,297 |
2,893 |
2,471 |
2,836 |
3,823 |
3,364 |
|
||
|
Net Debt |
(197) |
(6,759) |
137 |
2,363 |
(3,813) |
(3,724) |
|
||
|
Capital |
96,619 |
113,547 |
121,141 |
131,484 |
140,093 |
140,846 |
|
||
|
|
|
|
|
|
|
|
|
|
|
13 November 2018 |
2 |
vk.com/id446425943 |
Unipro |
Russia |
|
Electric Utilities |
|
Figure 1: General company information
Ticker |
UPRO RX |
12-month Target Price, RUB/share |
3.16 |
Rating |
BUY |
Installed capacity in 2018F, MW |
10,405 |
Current price, RUB/share |
2.78 |
Market cap, RUB mn |
175,275 |
EV, RUB mn |
175,412 |
EV/Installed capacity, USD/kW |
247 |
Multiples 2018F |
|
EV/EBITDA, x |
6.7 |
PE, x |
12.0 |
EBITDA margin, % |
35% |
Net debt/EBITDA, x |
0.0 |
Source: Company data, Bloomberg, VTB Capital Research
Figure 2: Unipro FCFF profile
|
30,000 |
|
|
25,000 |
|
RUBmn |
20,000 |
|
15,000 |
||
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||
|
10,000 |
|
|
5,000 |
- |
|
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|
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|
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018F |
2019F |
2020F |
2021F |
2022F |
2023F |
2024F |
2025F |
2026F |
2027F |
2028F |
Source: Company data, VTB Capital Research
Figure 3: Unipro dividend yield profile
18% |
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16% |
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15%16% |
|
15%15% |
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15% |
|
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14% |
|
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|
12% |
11% |
|
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|
|
11%12% |
|||
10% |
|
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|
8% |
9% |
|
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|
|
|
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|
|
10%10% |
|
||||
8% |
|
|
7% |
8% 8% |
|
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6% |
|
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4% |
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2% |
|
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0% |
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2014 |
2015 |
2016 |
2017 |
2018F |
2019F |
|
2020F |
2021F |
2022F |
|
2023F |
2024F |
|
2025F |
2026F |
|
2027F |
2028F |
|||
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|
Source: Company data, VTB Capital Research
Figure 4: Unipro capex outlook
|
18,000 |
|
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|
16,000 |
4,908 |
5,000 |
5,000 |
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14,000 |
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12,000 |
|
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|
RUBmn |
10,000 |
9,800 |
11,000 |
10,000 |
5,0005,863 |
5,0005,863 |
5,0005,863 |
5,0005,863 |
5,0005,863 |
5,0005,863 |
5,0005,863 |
10,171 |
10,171 |
|
8,000 |
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6,000 |
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|
|
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
2017 |
2018F |
2019F |
2020F |
2021F |
2022F |
2023F |
2024F |
2025F |
2026F |
2027F |
2028F |
||
|
|
Maintenance capex
Modernisation capex
Unit 3 Berezovskaya GRES reconstruction
Source: Company data, VTB Capital Research
Figure 5: Unipro adj. EBITDA profile
|
80,000 |
|
62% |
|
|
|
|
70% |
|
70,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60% |
|
|
60,000 |
|
48% |
45% |
|
|
50% |
|
|
|
|
47% |
|
|
|||
|
50,000 |
|
45% |
44% |
36% |
|||
|
|
36% 35%40% |
|
|
|
|||
RUBmn |
|
34% |
|
|
|
35% |
37% 40% |
|
40,000 |
|
|
|
34% |
30%% |
|||
|
32% |
|
|
|
||||
|
|
|
|
|
|
|||
|
30,000 |
|
|
|
|
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10% |
||||
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2014 |
2015 |
2016 |
2017 |
2018F |
2019F |
2020F |
2021F |
2022F |
2023F |
2024F |
2025F |
2026F |
2027F |
2028F |
|||||
|
|
Adj. EBITDA, lhs |
|
Adj. EBITDA margin, rhs |
|||||||||||||||
|
|
|
|||||||||||||||||
|
|
|
Source: Company data, VTB Capital Research
Figure 6: Unipro EV/installed capacity
|
900 |
|
|
800 |
|
|
700 |
|
|
600 |
|
USD/kW |
500 |
|
400 |
||
|
300
200
100 -
(100)
Dec-17
May-17
Oct-16
Mar-16
Aug-15
Jan-15
Jun-14
Nov-13
Apr-13
Sep-12
Feb-12
Jul-11
Dec-10
May-10
Oct-09
Mar-09
Aug-08
Jan-08
Source: Bloomberg, Company data, VTB Capital Research
Figure 7: Russian gencos multiples
|
EV/EBITDA, x |
|
P/E, x |
|
EV/kW, |
|
|
Net Debt/ |
|
|
|
EBITDA |
|
|
|
Net |
|
|
|
Dividend |
|
FCFF |
|
|||
|
|
|
|
|
|
|
USD/kW |
|
|
EBITDA, x |
|
margin, % |
|
margin, % |
|
|
yield, % |
|
|
yield, % |
|
|||||
|
2018F 2019F 2020F |
2018F |
2019F |
2020F |
2018F |
|
2018F 2019F 2020F |
|
2018F 2019F 2020F |
|
2018F |
2019F 2020F |
|
2018F 2019F |
2020F |
2018F 2019F 2020F |
||||||||||
Unipro |
6.7 |
5.6 |
3.7 |
12.0 |
9.6 |
6.0 |
247 |
|
0.0 |
0.1 |
(0.1) |
|
35% |
40% |
48% |
|
20% |
23% |
30% |
|
8.0% |
8.0% |
15.5% |
4% |
7% |
15% |
Russian average |
2.9 |
3.0 |
2.7 |
5.3 |
6.1 |
5.6 |
109 |
|
0.3 |
0.4 |
0.5 |
|
23% |
23% |
24% |
|
11% |
10% |
11% |
|
7.6% |
6.8% |
8.5% |
18% |
8% |
9% |
DM average |
7.6 |
7.2 |
6.6 |
16.5 |
13.9 |
11.8 |
1,067 |
|
2.6 |
2.5 |
2.3 |
|
18% |
19% |
20% |
|
6% |
7% |
8% |
|
5.3% |
5.3% |
5.3% |
-6% |
-6% |
-6% |
Source: VTB Capital Research (for Unipro and the Russian average), Bloomberg as of 12 November 2018 (for the DM average)
13 November 2018 |
3 |
vk.com/id446425943
Russia
Electric Utilities
Unipro
9mo18 conference call messages
During the conference call, management provided the following updates.
Unipro narrowed its EBITDA guidance to RUB 26-27bn, with production results and electricity prices in 4Q18 to define the outcome.
Unipro management said that it expected modernisation auctions to be postponed until March 2019; the previous guidance was December 2018. This was corroborated by Christopher Delbruck, the CFO of Uniper, the Unipro controlling shareholder, during the Uniper conference call. The CFO said that the auctions would likely take place in 1Q19. He added that, “we selected projects Unipro will be bidding with and will be ready to update our bids should details of the programme will change [sic]”.
Commenting on the relaunch of Unit 3 Berezovskaya GRES, the company noted the possibility of the delays in the commissioning from the previously noted 3Q19 to 4Q19 due to fire-coating procedures; project-related capex guidance was reiterated.
Due to the prospective modernisation auction postponement, Unipro will be rolling out the updated dividend policy in March 2019, rather by YE18. However, management provided RUB 14bn guidance for FY19.
Figure 8: Unipro 9mo18 financial highlights
|
9mo18 |
9mo18F, VTBC |
Diff to VTBCF |
9mo17 |
Chng, YoY |
|
|
|
|
|
|
Revenues |
54,824 |
56,298 |
-3% |
56,040 |
-2% |
Adj EBITDA |
19,176 |
20,372 |
-6% |
39,923 |
-52% |
Adj EBITDA margin |
35% |
36% |
|
71% |
|
Net income |
11,187 |
12,072 |
-7% |
29,092 |
-62% |
Net income margin |
20% |
21% |
|
52% |
|
Source: Company data, Bloomberg, VTB Capital Research
13 November 2018 |
4 |
vk.com/id446425943 |
Unipro |
Russia |
|
Electric Utilities |
|
Medium-term outlook
The medium-term outlook for Unipro is not as muted as it is for most Russian utilities, in our view. The company’s growth is buttressed by the relaunch of Unit 3 Berezovskaya GRES, planned for 3Q19, and thus suggesting FY contribution starting from 2020F (see our Unipro – Berezovskaya site visit & case study, of 1 October). As early as in its 2019F financials, Unipro could deliver adjusted EBITDA growth of 22% YoY, with DPM revenues feeding directly into EBITDA, leading to it print at RUB 31,944mn, on our numbers. In terms of net income, this would translate into a 26% upturn, with flat YoY dividends in absolute terms with an 8% dividend yield. Partially, this growth can be explained by the elevated 4Q18 numbers on back of the Berezovskaya re-launch, but other factors also contribute to the 26% growth story.
Figure 9: Unipro 2019F Adjusted EBITDA outlook |
Figure 10: Unipro 2019F net income outlook |
RUBmn
35,000 |
|
|
|
|
25,000 |
|
|
|
|
33,000 |
6,821 |
2,378 |
1,375 |
|
|
5,818 |
383 |
937 |
749 |
31,000 |
|
20,000 |
|||||||
|
|
|
|
|
|
|
|
||
29,000 |
|
|
|
|
|
|
|
|
|
27,000 |
|
|
|
RUBmn |
15,000 |
|
|
|
|
25,000 |
26,126 |
|
31,944 |
|
14,593 |
|
|
18,343 |
|
23,000 |
|
10,000 |
|
|
|||||
|
|
|
|
|
|
|
|
||
21,000 |
|
|
|
|
|
|
|
|
|
19,000 |
|
|
|
|
5,000 |
|
|
|
|
17,000 |
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
- |
|
|
|
|
Adj |
Revenue Costs |
Other |
Adj |
Net |
Adj |
Net fin |
Tax |
Other |
Net |
EBITDA |
|
|
EBITDA |
income EBITDA |
exp |
|
|
income |
|
2018F |
|
|
2019F |
2018F |
|
|
|
|
2019F |
Source: Company data, VTB Capital Research |
|
Source: Company data, VTB Capital Research |
Our model brings even more positivity for 2020F, with another 45% YoY upturn in EBITDA due to the new unit operating for a full year and the delta DPM beginning at the end of 2020F. With this EBITDA growth, we see net income climbing as much as 59% and FCFF expanding along with the end of the reconstruction capex. This all frees funds for extra dividends, which, in our view, could almost double. We assume that the company moves to the dividend policy of its parent company, OCF excluding capex. Thus, the dividend yield could print at 15.5%, and it is for this reason the market is waiting for the relaunch. However, we do not expect the relaunch to be fully reflected in the price long before the actual event, and so September 2019 might be the next trigger.
All this means that Unipro is about enter a period where it clearly has the fastest profitability growth in the sector, in our view.
13 November 2018 |
5 |
vk.com/id446425943 |
Unipro |
|
Russia |
|
|
Electric Utilities |
|
|
Figure 11: Unipro 2020F Adjusted EBITDA outlook |
Figure 12: Unipro 2020F net income outlook |
RUBmn
50,000 |
15,250 |
1,588 |
|
|
|
35,000 |
14,315 |
164 |
2,706 |
|
45,000 |
654 |
|
|
30,000 |
620 |
|||||
|
|
|
|
|
|
|
|
|
||
40,000 |
|
|
|
|
|
25,000 |
|
|
|
|
35,000 |
31,944 |
|
|
46,259 |
RUBmn |
20,000 |
18,343 |
|
|
29,168 |
30,000 |
|
|
15,000 |
|
|
|||||
|
|
|
|
|
|
|
|
|
||
25,000 |
|
|
|
|
|
10,000 |
|
|
|
|
20,000 |
|
|
|
|
|
5,000 |
|
|
|
|
15,000 |
|
|
|
|
|
- |
|
|
|
|
Adj |
Revenue Costs |
Other |
Adj |
Net |
Adj |
Net fin |
Tax |
Other |
Net |
EBITDA |
|
|
EBITDA |
income EBITDA |
exp |
|
|
income |
|
2019F |
|
|
2020F |
2019F |
|
|
|
|
2020F |
Source: Company data, VTB Capital Research |
|
Source: Company data, VTB Capital Research |
Long-term drivers
Unipro enters a plateau of elevated profits in 2020-24F, which will be enough to both maintain its ambitious dividend policy and undertake the required DPM-2 investments. The profitability cliff, which other gencos start facing in the coming 6-18 months, will become a risk for Unipro only in 2025, in our view, affording plenty of time for shareholders to find recompense in front-loaded dividends and for management to identify and make investments that might offset the profit declines.
Figure 13: Unipro adj EBITDA outlook
RUBmn
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000 |
|
|
|
|
|
|
1,086 |
2,171 |
3,257 |
|
|
|
|
|
|
|
|
|
16,188 |
|
|
|
|
|
|
||||
|
20,449 |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
21,850 |
|
|
|
|
|
|
|
|||
30,000 |
|
|
|
4,417 |
|
21,912 |
21,987 |
18,838 |
|
5,428 |
6,514 |
6,514 |
||
|
|
|
|
|
4,342 |
2,964 |
||||||||
|
5,651 |
|
|
|
|
|
|
|
|
2,757 |
2,858 |
|||
|
|
|
|
15,166 |
|
|
|
|
2,659 |
3,092 |
3,213 |
|||
|
|
|
|
|
|
|
|
|
2,976 |
|
||||
20,000 |
|
13,859 |
|
15,386 |
6,418 |
|
2,653 |
2,757 |
2,864 |
|
|
|||
10,342 |
15,402 |
|
2,554 |
|
|
|
||||||||
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|||||||
10,000 |
12,308 |
13,159 |
|
12,141 |
14,905 |
16,367 |
17,003 |
17,729 |
18,744 |
19,807 |
20,921 |
22,088 |
23,312 |
|
|
10,724 |
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|||||
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2016 |
2017 |
2018F |
2019F |
2020F |
2021F |
2022F |
2023F |
2024F |
2025F |
2026F |
2027F |
2028F |
||
|
|
|
Adj EBITDA without DPM, modernisation and Berezovskaya U3 |
|
DPM revenues without Berezovskaya U3 |
|
|
|
||
|
|
Berezovskaya U3 adj EBITDA |
|
Modernisation |
|
|
|
||
|
|
|
||
|
|
|
|
|
Source: Company data, VTB Capital Research |
|
|
Along the way, we expect Unipro to deliver a best-in-class 15-16% dividend yield in 2020-24F, and 9-12% onward, due to the phasing out of DPM. However, taking into account our assumption that the company will pay 100% of OCF excluding capex, we expect Unipro to remain either zero or net cash positive.
13 November 2018 |
6 |
vk.com/id446425943 |
Unipro |
Russia |
|
Electric Utilities |
|
Figure 14: Unipro dividend yield vs. leverage |
|
|
|
|
|
|
|
|
|
|
||||||
20.00% |
|
|
|
|
(0.0) |
0.0 |
0.1 |
|
|
|
|
0.1 |
0.1 |
0.0 |
0.0 |
0.2 |
18.00% |
|
|
|
|
|
|
(0.1) |
|
|
|||||||
|
|
|
|
|
(0.1) |
(0.1) |
(0.1) |
(0.1) |
|
|
|
- |
||||
|
|
|
|
|
(0.1) |
|
|
|
|
|||||||
16.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.2) |
|
14.00% |
|
|
|
(0.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.4) |
||
12.00% |
|
|
(0.5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
%10.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.6)x |
8.00% |
|
(0.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.8) |
6.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.0) |
|
4.00% |
(1.1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.2) |
||
2.00% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11.30%14.81%11.26%6.87% 8.3% |
8.6% 8.0% |
8.0% 15.5% 15.5% 14.6% 15.3% 15.1% 9.5% |
9.7% 11.2% 11.9% |
|
||||||||||||
0.00% |
(1.4) |
|||||||||||||||
|
2012 |
2013 |
2014 |
2015 |
2016 |
2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F |
|
|||||||||
|
|
|
|
|
|
Dividend yield, % |
Net debt/EBITDA, x |
|
|
|
|
|
||||
Source: Company data, VTB Capital Research |
|
|
|
|
|
|
|
|
|
|
|
|
|
Forecast changes
As aforementioned, Unipro’s investment case remains straightforward: the company delivers a high dividend yield of 8% before 2020F and 15-16+% onwards, having the residual profitability growth on the back of the unit 3 Berezovskaya GRES relaunch, which enables it to blip brightly on investor radars. Most concern likely comes from the rouble nature of the story (Russian Utilities – Roadshow feedback; investors are not happy, of 26 October), and actually tackling this concern using the forward rates, we still find Unipro offers a potential dividend yield of 13-14+%.
We update our model for the released operating and financial data; we also incorporate updated economic forecasts, roll forward our model into 2019F. We derive a new 12-month Target Price of RUB 3.16, implying ETR of 22%.
Figure 15: Unipro forecast changes
RUB mn |
2017 |
2018F |
2019F |
2020F |
2021F |
2022F |
2023F |
2024F |
2025F |
2026F |
2027F |
2028F |
New forecast |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
76,522 |
73,950 |
80,771 |
96,021 |
95,701 |
95,002 |
98,485 |
99,084 |
86,716 |
90,774 |
94,944 |
98,144 |
Adj. EBITDA |
47,466 |
26,126 |
31,944 |
46,259 |
44,634 |
42,555 |
44,541 |
43,596 |
29,673 |
32,082 |
34,552 |
36,002 |
Net income |
33,605 |
14,593 |
18,343 |
29,168 |
27,934 |
26,187 |
27,670 |
26,833 |
15,486 |
17,212 |
19,160 |
20,389 |
Previous forecast |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
76,522 |
76,404 |
81,824 |
96,644 |
96,772 |
95,467 |
98,162 |
97,656 |
84,119 |
87,858 |
91,711 |
|
Adj. EBITDA |
47,466 |
28,207 |
32,525 |
46,815 |
46,024 |
43,801 |
45,566 |
44,126 |
29,680 |
31,797 |
33,976 |
|
Net income |
33,605 |
16,303 |
18,930 |
30,038 |
29,585 |
27,765 |
29,144 |
27,976 |
16,271 |
17,822 |
19,632 |
|
Change, % |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
0.0% |
-3.2% |
-1.3% |
-0.6% |
-1.1% |
-0.5% |
0.3% |
1.5% |
3.1% |
3.3% |
3.5% |
|
Adj. EBITDA |
0.0% |
-7.4% |
-1.8% |
-1.2% |
-3.0% |
-2.8% |
-2.3% |
-1.2% |
0.0% |
0.9% |
1.7% |
|
Net income |
0.0% |
-10.5% |
-3.1% |
-2.9% |
-5.6% |
-5.7% |
-5.1% |
-4.1% |
-4.8% |
-3.4% |
-2.4% |
|
Source: Company data, VTB Capital Research
13 November 2018 |
7 |