8/3/2019 NKNC_En_110525
1/1
5.1 16.9 6.1 12.1 4.5 9.3
3.35 7.01 4.16 6.43 2.61 5.94
0.56 0.79 0.56 0.72 0.40 0.70
2Q
453.9
771.5
-
2Q
0.023
0.036
-
2Q
11.5%
20.4%
-
2Q
9.5%
8.6%
-
OLMA Research
Head of Department - Dmitry Parfenov
Equity Markets - Anton Startsev
Metals & Mining, Chemicals - Ilya Klenin
Financial Institutions - Ruslan Yunusov
Utilities - Roman Gabbasov
Tel.: (495) 960-31-21
-2011 16.9% - -
-2011 11.4% -
9.7%
2010 13.4% 19.7% 12.0% 16.4%
2009 14.6% 9.4% 5.3%
Full YearE
1Q 3Q 4Q
-
0.7%
2010 6.9% 11.6% 3.4% 7.6%
2009 -15.4% 7.0% -1.7%
Net Margin, %Full Year
E
1Q 3Q 4Q
0.129
2011 0.064 - - -
2010 0.026 0.051 0.016
Full YearE
3Q 4Q
-0.029 0.020 -0.006 0.007
1Q
2009
EBITDA Margin, %
Earnings Pers ShareD, US$
Total Assets 3.6% -2.1% 2.5%
13.8% -13.8%
Net Income 25.5% 13.8% -26.7%
10.6% 7.4%
BUSINESS: Nizhnekamskneftekhimis the largest producer and
expor ter of pet rochemicals in Russ ian Federation. The
company's produce is mainly used in production of automotive
and aeronautical tyres, as wel l as in production of FMCG
package and medical components.
Gross income 10.8% 10.5% 2.8%
EBITDA 13.9%
5% 1% Sales 15.9%
3yr 5yr Est-s
Net Margin 10% 5% 7% 7% 2% 1% 8%
11% 5% CAGR 5yr
1 176.3 1 384.1
EBITDA Margin 22% 18% 15% 15% 13% 10% 16%
21% 16% Shareholder Equity 986.8
295.0 278.9
Gross Margin 29% 25% 21% 20% 19% 14% 20%
193.7 50.2 Non-Current Liabilities 370.4
457.3 633.7
Net Income (US$ mln) 115.5 76.0 122.3 160.2 70.9 13.4 236.3
440.6 243.3 Current Liabilities 593.2EBITDA (US$ mln) 260.9
265.8 264.7 346.3 375.1 184.3 510.4
812.8 706.2 Liabilities
1338.0 1411.9
Gross income (US$ mln) 343.9 367.0 375.4 455.4 528.3 263.3
613.7
3 936.2 4 435.6 Non-Current Assets 1462.0
482.2 633.2
Sales (US$ mln) 1 176.1 1 488.7 1 748.6 2 296.4 2 853.0 1 902.0
3 108.9
124.8 0.0 Other Current Assets 398.8
108.4 251.6
ST Debt (US$ mln) 32.0 12.6 19.9 112.5 229.1 238.4 165.4
235.2 0.0 Cash 89.7LT Debt (US$ mln) 257.1 511.7 473.4 445.1
401.8 311.8 255.3
1 309.9 1 357.3 Assets
2010 1Q11
Net Assets (US$ mln) 744.6 790.2 955.0 1 146.1 951.1 986.8 1
176.3
2 359.4 2 177.4 Current Posit ion 2009
7.0 16.8
Total Assets (US$ mln) 1 274.4 1 616.6 1 744.4 2 052.5 1 889.2 1
950.5 1 928.6
6.4 17.3 34.6 3.9Average P/E Ratio 7.3 16.1 13.6
0.039
Preferred Shs Outst'g, mln 219 219 219 219 219 219 219
Common Shs Outst'g, mln
0.012 0.002 0.039
Dividends per Preferred Share 0.006 0.006 0.020 0.026 0.012
0.002
0.006 0.006 0.020 0.026
219
Earnings per ShareD 0.06 0.04 0.07 0.09 0.04 0.01 0.13
Dividends per Common Share
2011B
2015B Nizhnekamskneftekhim (NKNH) is the largest Russian
producer of synthetic rubbers, monomers and other
petrochemicals. NKNH was established in 1967. NKNH
is one of the world's largest suppliers of isoprene and
butyl rubbers, with respective global market share of
35% and 15%. The company exports about 50% of its
production and employs over 17000 people.
0.11 0.03
0.033 0.008
0.033 0.008
219
Est12mB 15%
Indicators, RAS (US$) 2004 2005 2006 2007 2008 2009 2010
2010
6m 17% ST Debt $196.9 mln
LT Debt $234.1 mln
Common stock 1,611,256,000
Preferred stock: 218,983,750
Market Cap: $1,435
12m 84%
18m 89%
24m 275%
P/E
0.175 0.135 0.363 C LowC
0.475 0.320 0.458 P HighC
0.423 0.470 0.325 0.256
$0.94Recommen
dation Buy
0.585 1.095 1.295 0.923 1.096 0.475 0.750
Notes
(A) Bloomberg estimates, (B) OLMA estimates, (C) C stands
for
common, P stands for Preferred, (D) Per total sharesoutstanding,
(E) Totals may not add up due to currency
conversion error; All figures in the report - IFRS, figures in
bold -
OLMA estimates
The information contained herein is for your private use. OLMA
respects international regulations concerning sales and
distribution of securities, therefore we do not solicit any action
based upon this
information. This is not to be construed as an offer or
recommendation to purchase or sell any investment. OLMA has based
this document on information obtained from sources it believes to
be
reliable, but which sometimes it has not independently verified,
therefore we provide no guarantee for its completeness and/or
accuracy.
Nizhnekamskneftekhim Common
RTS: NKNC; MICEX: NKNCRecent
Price $0.82 Div'd Yld 4.7%Target
Price
Nizhnekamskneftekhim Preferred
RTS: NKNCP; MICEX: NKNCPRecent
Price $0.5 Div'd Yld
2011
1 611
Sell EV/EBITDA
Hold EV/S
% Total Return Capital Structure as of 31/03/2011
2012
Buy
7.7%Target
Price $0.49C High
C Trading Multiples /(Emerging markets median)
Recommen
dation Hold
1 611 1 611 1 611 1 611
LLC "Telecom Management" (a TAIF related company) owns
44.6% in Nizhnekamskneftekhim;Svyazinvestneftekhimowns
25.2% (the stake is under LLC "TAIF Invest" trust
management).Tatarstan Government owns a goldenshare in
the company.
CEO: V. M. Busygin. Web: http://www.nknh.ru/
Institutional
DecisionsA
(1Q11)
2
1
1
1 611 1 611 1 611 1 611
Quarterly Sales, US$ mlnFull YearE
1Q 3Q 4Q
1 902.0
2010 700.1 801.6 833.6 3 108.9
2009 341.0 518.8 609.5
-2011 1 022.1 - -
0.300 0.508 0.860 0.423
0.198 0.280 0.245 0.150 0.085 0.075 0.160 P LowC
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4NKNC NKNCP
We initiate our coverage of Nizhnekamskneftekhim
("NKNC").
NKNC specializes in the production of
petrochemicals, mainly, synthetic rubbers (SR),
plastics and monomers, having significant share of
the global isoprene and butyl rubber markets. The
company manufactures over 100 products; over
50% of total output is exported to a total of 59
countries. The largest export market for the
company is China (15 %), while various countries in
Europe and the CIS in aggregate account for more
than 53 % of the companys exports.
The companys profitability essentially depends on
the dynamics of the world prices for SRs and
plast ics, which is a ref lection of the growth of theglobal
economy in general. The current state of the
global petrochemicals market has been extremely
favorable since October 2010. Spot prices for
natural rubber RSS4 (a benchmark for other types of
rubbers) have grown more than 30 % and are now
$4825 per ton.
We are concerned the pace of SRs spot price
appreciation may slow down: growth prospects for
the global economy this year have become less
obvious, as almost all macroeconomic indexes
signal a slowdown. That forces us to take a cautious
stance in forecasting petrochemical products prices
for the short and medium term. In our model we
assume RSS4 prices wil l average $4200 per ton in
2011, growing by a modest 3 % per annumthereafter.
Long-term prospects for the company do not look
attractive either: China looks poised to aggressively
expand capacity by 2020 and is expected to become
self-sufficient in almost every type of synthetic
rubber. At the same t ime the European market is
supposed to experience a major shift in
consumption patterns due to a tightening of
government regulation with regard to the
environmental and transportation concerns, implying
that demand for basic SRs wil l shift to specialized
new generation ones and should be seen a long
term threat to NKNCs exports.
Meanwhile, the domestic SR market is expected to
increase in-line with the local automotive market,
estimated to grow 5 % annually. By 2020 the
domest ic market is expected to increase up to 0,7million tons,
which, certainly, will not be sufficient to
replace the slump in European and Chinese exports,
while about 90% of the domestic SR market is
already being supplied by Russian producers.
In determining NKNC valuation, we have decided to
combine our DCF with the closest comparables we
could find. Although our DCF approach alone does
not suggest any meaningful upside to the companys
valuation, NKNC looks inexpensive based on
comparable trading multiples. That said, our
estimated target prices for NKNCs shares are $0.94
per common and $0.49 per preferred share,
implying a Buy and a Hold recommendation for
commons and preferreds, respectively.
Ilya Klenin (May 25, 2011)
e-mail: [email protected]
