Andrey Lobazov graduated from the Plekhanov Academy of Economics, and holds a postgraduate diploma in International Trade Law from London Metropolitan University as well as a PhD in Economics. Prior to Joining IFC METROPOL, Lobazov worked for KPMG for three years as an auditor in the Industrial Markets Group.
Initiating with a BUY recommendation – 72% upside potential
We initiate coverage of Alrosa, the world’s second largest diamond producer, with a Buy recommendation. Our fair value of USD 16,345 per share implies 72% upside for 2011 year-end. Even when applying fairly conservative price assumptions for raw diamonds – a 3% CAGR in 2010-2016 – the stock is undervalued in our view. Due to low liquidity and transparency, Alrosa trades at a more than 40% discount on P/E and EV/EBITDA multiples to small diamond producers, as well as to diversified mining companies.
Fair value changed to USD 6.07 per share on new production volume forecast and blast recovery cost estimates
We change our 2010 year-end fair value for Raspadskaya to USD 6.07 per share. Our new fair value implies 32% upside potential from the current price and we maintain our Buy recommendation on the stock.
We applied a new forecast for Raspadskaya’s production volumes, which were affected by explosions at the Koksovaya mine in May this year. It now appears that the company is increasing production faster than expected. We also updated our recovery cost estimates and WACC calculation.
We initiate coverage of the Russian pipe manufacturing sector with three Buy recommendations. Our top picks include Tubular Metallurgical Company (TMK), with a target price of USD 26.2 per GDR, implying 72% upside, and Vyksa Metallurgical (VSMZ) with a target price of USD 2,575 per share and 101% upside to the current market price.
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