vk.com/id446425943
Russia
Equities
Luxoft – Upgrade to Buy; still facing challenges, but recent correction overdone, of 16 November, by Vladimir Bespalov et al.
Alrosa – Melee diamond market weakness spreads as De Beers cuts prices, of 13 November, by Dmitry Glushakov et al
Russian Utilities – Roadshow feedback; investors are not happy, of 26 October
Week Endnotes
What we are changing this time
To the ML basket
Add LXFT. The stock declined almost -33% since 21 September peak (of which -22% since 8 November), expanding the YTD loss to -40%. The sharpest drop was after a company’s earnings release, with guidance implying some further slowdown. However, the results beat the consensus on profitability, with expectedly flat top-line. The adjusted EBITDA margin of 16% was above the management guidance of 13.5- 14.5%. The sell-off was an overreaction, in our view, and thus we see this development as an attractive entry point and include the stock to our ML portfolio.
Exclude ALRS. Exclude ALRS. The diamond market provided short-term headwinds to the company’s investment case as Bloomberg reported a decrease of melee diamond prices by -10% by De Beers. The news highlights ongoing weakness in demand for lower-priced stones. Alrosa has cut its November prices of smaller stones, reacting to the De Beers price decrease for stones of the same category. With a mixed set of possible near-term triggers in our view, we exclude the stock from our ML basket. Our Metals & Mining team’s 12-month TP of RUB 130/share implies a 43% ETR and a Buy recommendation, so we will be monitoring the stock for better entrance opportunities.
Exclude UPRO. The stock delivered negative gains of -11% in USD-terms since its inclusion into our ML universe. We do not see any near-term triggers for the stock rerating as the further double-digit dividend yield, offered by the company, remains hard for pricing due to the rouble nature of the business and significant FX volatility at the moment. We give up on the story at least in the near term and exclude the stock from our ML basket.
Figure 3: VTB Capital Most/Least Liked Stocks (Russia)
Name |
Ticker |
Rec |
12-mo TP |
Upside |
Dividend yield |
Opened |
Performance |
P/E, x |
|
EV/EBITDA, x |
|||
|
|
|
|
|
LTM |
NTM |
|
Absolute |
Rel. to RTS |
2017 |
2018 |
2017 |
2018 |
Most liked |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sberbank |
SBER RX |
Buy |
RUB 330 |
65% |
6% |
9% |
3/15/2017 |
+28% |
+8% |
5.3 |
5.3 |
n/a |
n/a |
Inter RAO |
IRAO RX |
Buy |
RUB 8.40 |
111% |
3% |
4% |
3/23/2018 |
-6% |
-2% |
4.2 |
4.2 |
1.3 |
1.3 |
Nornickel |
GMKN RX |
Buy |
RUB 14,200 |
21% |
12% |
13% |
6/22/2018 |
+13% |
+6% |
6.9 |
6.9 |
6.0 |
6.0 |
PhosAgro |
PHOR LI |
Buy |
USD 17.00 |
30% |
4% |
5% |
6/22/2018 |
+5% |
-3% |
7.2 |
7.2 |
5.4 |
5.4 |
Gazprom Neft |
SIBN RX |
Hold |
USD 6.10 |
8% |
4% |
9% |
10/12/2018 |
+1% |
-1% |
4.3 |
4.3 |
3.4 |
3.4 |
Rosagro |
AGRO LI |
Buy |
USD 13.50 |
29% |
4% |
4% |
10/19/2018 |
+1% |
+1% |
8.9 |
8.9 |
7.0 |
7.0 |
Luxoft |
LXFT US |
Buy |
USD 50.00 |
50% |
0% |
0% |
11/16/2018 |
- |
- |
17.5 |
17.5 |
10.7 |
10.7 |
Least liked |
|
|
|
|
|
|
|
|
|
|
|
|
|
Novatek |
NVTK LI |
Sell |
USD 100.00 |
-44% |
2% |
2% |
3/15/2017 |
+53% |
+34% |
15.4 |
15.4 |
15.2 |
15.2 |
NLMK |
NLMK LI |
Hold |
USD 23.50 |
-5% |
13% |
11% |
1/12/2018 |
+2% |
+6% |
6.3 |
6.3 |
4.4 |
4.4 |
EVRAZ plc |
EVR LN |
Sell |
GBp 450 |
-18% |
11% |
10% |
3/30/2018 |
+26% |
+30% |
5.2 |
5.2 |
4.1 |
4.1 |
Source: Bloomberg, VTB Capital Research
For the dynamically updated performances of the ML and LL baskets, as well as the history of closed trades, see the MLLS section of the VTB Capital Research Portal
16 November 2018 |
12 |