EQUITY | Russia Research analysts Electric Utilities Sergey Beiden [email protected] +7 (495) 213-18-35 20 September 2013
UPDATE / DOWNGRADE
Russian Utilities Slow strangulation by the government
Sector ratings We have incorporated the proposed tariff freeze into our model, Target Price, resulting in our target prices for the Genco and Grid segments Rating Company RUB falling by an average of 1% and 26%, respectively. We have also Old New Old New downgraded our ratings for Lenenergo prefs, MRSK North-West, OGK-2 0.38 0.40 HOLD HOLD and MRSK Siberia to SELL. Despite the government’s ad-hoc EoNR 3.53 3.43 BUY BUY regulation and incoherent strategy towards the sector, we still Enel OGK-5 1.8 1.89 HOLD HOLD see some attractive corporate stories in the Genco space, in TGK-1 0.01 0.0104 BUY BUY particular EoNR, TGK-1, Mosenergo and possibly OGK-2. TGK-2 0.0018 0.0015 HOLD HOLD Mosenergo 1.97 1.9 BUY BUY The Russian government is set to freeze electricity tariffs in 2014, Quadra 0.0034 0.0032 HOLD HOLD returning to inflation-linked growth in 2015 and beyond. Recently the TGK-5 0.0022 0.0022 SELL SELL Russian government approved a freeze on domestic gas and grid tariffs for TGK-6 0.0023 0.0025 SELL SELL industrial consumers, while the heat tariffs are likely to grow less than TGK-7 1.49 1.64 HOLD HOLD inflation. It plans to return to inflation-linked tariff growth from July 2015 TGK-9 0.0026 0.0024 HOLD HOLD onwards. TGK-14 0.0019 0.0019 HOLD HOLD Gencos will suffer less than Grids. As fuel is the major contributor to the Inter RAO 0.018 0.015 HOLD HOLD Gencos‟ costs structure, while fixed costs have been efficiently controlled by RusHydro 0.7 0.7 HOLD HOLD the major Gencos, we don‟t expect the tariff decision to have a big impact on FGC 0.14 0.10 HOLD HOLD the FY14-15 financials of the efficient Gencos (EBITDAs down just -3% and MOESK 1.17 1.11 HOLD HOLD -5% on average vs our previous forecasts). On the other hand, the cost Lenenergo 5.04 3.60 HOLD HOLD structure of FGC, Russian Grid and the MRSKs are mostly inflationary, and Lenenergo PREF 13.68 9.81 HOLD SELL these companies have not been successful in controlling their fixed costs, MRSK Center 0.48 0.30 HOLD HOLD especially employee costs. The Grids are therefore much more sensitive to MRSK North-West 0.05 0.03 HOLD SELL tariff decisions (we have cut our FY14-15 EBITDA forecasts on average by MRSK Center&Volga 0.14 0.12 HOLD HOLD 7% and 15%, respectively). MRSK Urals 0.16 0.13 HOLD HOLD The tariff decision should trigger cuts to capex, though not by much, in MRSK Volga 0.08 0.05 HOLD HOLD our view. The logical response to the tariff freeze would be to cut capex. MRSK Siberia 0.09 0.06 HOLD SELL However, the government‟s rhetoric implies that capex will be kept at the MRSK South 0.04 0.03 HOLD HOLD same level – this is a sensitive point for the government, as a large cut in Russian Grid 1.32 1.04 HOLD HOLD capex for state-controlled companies would put an unacceptable dent in Russian Grid pref 1.12 0.88 HOLD HOLD GDP growth. We therefore anticipate only a slight decrease in capex for the Sources: Bloomberg, Otkritie Capital estimates sector.
Despite 25% payout ratios based on IFRS for state-controlled companies, the resulting yields are not enough to re-rate the utilities. The government‟s plan for state-controlled companies to pay 25% of their IFRS Net Income as dividends could result in higher dividends for these companies. However, it is not clear if the adjusted or reported Net Income is to be used, and whether it covers the subsidiaries of state-controlled companies. Nevertheless, even if the most optimistic assumptions are applied, the dividend yields for the major state-owned utility names are unlikely to exceed 5%, which is not enough to trigger a re-rating. EoNR, TGK-1, Mosenergo and OGK-2 offer some attractions, while the Grids are too risky to touch. Investors have shunned utilities in light of the government‟s ad-hoc regulation, lack of strategy towards the sector, and its use of some utilities to achieve short-term economic or social goals. Nevertheless, the Genco segment is relatively transparent (apart from state- owned RusHydro and Inter RAO, which have very unpredictable capex due to government meddling), and we highlight EoNR, TGK-1, Mosenergo and OGK-2 as having attractive corporate stories, which could result in their stocks delivering a fair performance.
Important information available at https://research.otkritie.com/ is accessible via hyperlink: Disclosures & Disclaimer. This investment research is produced by Otkritie Securities Ltd, authorised and regulated by the Financial Conduct Authority (FCA), and has been prepared by non-US research analysts who are not FINRA registered/qualified as research analysts.
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Table of Contents
Some Gencos look attractive; Grids too risky given ad-hoc regulation ...... 3 Dividends should protect stocks from further significant falls ...... 3 External factors inhibit rise in electricity tariffs ...... 4 Cross-subsidies could further damage prospects for the Grid segment ...... 5 Government has no clear strategy on how to solve the “last mile” problem, but Grids are likely to suffer ...... 5 A new capacity market model, thought to benefit most Gencos, is unlikely to emerge ...... 5 Tariff freeze puts liberal sector development on hold ...... 5 Poor corporate governance of state-controlled companies reflects government’s unpredictability ...... 6 Government’s new dividend strategy is unlikely to boost the shares ...... 7 Share prices have slumped on poor regulation ...... 8 Utilities‟ share prices dived 20% and 35% in FY12 and YtD, respectively ...... 8 Privatisation or nationalisation? ...... 9 Collapse in utility stocks could drive the government towards nationalisation ...... 9 Valuation ...... 10 Downgrades on much lower 2014 forecasts after incorporating tariff freeze ...... 10 Financial forecasts ...... 13 RusHydro ...... 13 Inter RAO ...... 14 OGK-2 ...... 15 EoNR ...... 16 Enel OGK-5 ...... 17 TGK-1 ...... 18 TGK-2 ...... 19 Mosenergo ...... 20 Quadra (TGK-4)...... 21 TGK-5 ...... 22 TGK-6 ...... 23 VTGK (TGK-7) ...... 24 TGK-9 ...... 25 TGK-14 ...... 26 FGC ...... 27 Russian Grid ...... 28 MOESK ...... 29 Lenenergo ...... 30 MRSK Center ...... 31 MRSK Center&Volga ...... 32 MRSK North-West ...... 33 MRSK Siberia ...... 34 MRSK of South ...... 35 MRSK of Ural...... 36 MRSK of Volga ...... 37 Disclosures appendix ...... 38
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Otkritie Capital 2
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Some Gencos look attractive; Grids too risky given ad-hoc regulation Dividends should protect stocks from further significant falls EoNR, TGK-1, OGK-2, and Mosenergo are worth considering, but Grids are too risky. The government‟s muddled approach to the sector has resulted in investors shunning utility stocks. Nevertheless, the Genco segment is relatively transparent, apart from RusHydro and Inter RAO, which the government appears to using to reach some of its social and political goals, resulting in very unpredictable capex spending. We highlight below some corporate stories that could result in their stocks delivering a fair performance. ▪ EoNR [BUY, TP RUB3.43] has been outperforming the overall market for several years. We currently expect a positive dividend surprise (given the parent‟s call for a 100% payout in FY12), though model a conservative 50% payout ratio (5.5% dividend yield). If the company increases the ratio to 80%, the yield would rise to 9%, giving upside support for the shares. ▪ TGK-1 [BUY TP RUB0.0104] is set to beat consensus estimates for FY13 on the back of a solid operational performance YtD. We forecast a FY13 dividend yield of slightly below 5%, but recent developments in its heat infrastructure business could translate into higher capex subsidies from the government and future dividend yields of above 6%. ▪ OGK-2 [HOLD, TP RUB0.40]. Though we have a HOLD rating and investors are unlikely to see any dividends in the near term, the company trades at just 50% of the money it has already invested under the capacity supply agreements. Moreover, it is likely to beat consensus and management guidance for FY13. We expect strong 9M13 figures to result in a consensus and management upgrade and a firmer share price. However, the company has historically delivered both negative and positive earnings surprises, so we will refrain from upgrading until the 9M13 RAS figures have been released. ▪ Mosenergo [BUY, TP RUB1.9] is a speculative BUY, as we believe that after Gazprom Energoholding‟s acquisition of MOEK, Mosenergo could benefit not only from synergies related to the deal, but also from a possible increase in heat tariffs for its plants as a result of some MOEK boilers being decommissioned. We estimate this would lead to four-year CAGRs of 10% for EBITDA and 20% for the bottom line. Grids are too risky. The grid companies are currently governed by the inefficient structure of Russian Grid, which brings with it conflicts of interests, low incentives to reduce costs and contradictory statements on the grid capex programmes. However, we believe that some MRSKs could show reasonable dividend yields, which is likely to prevent a deep decline in these stocks. We believe FGC and Russian Grid could see some downwards pressure on their stocks, though again a sharp decline is unlikely. Despite a possible 25% payout ratio based on IFRS, the resulting yields are not enough to re-rate the utilities’ stocks. The government‟s plan for state-controlled companies to pay 25% of their IFRS Net Income as dividends could result in higher dividends. However, it is not clear if adjusted or reported Net Income is to be used, and whether it will cover the subsidiaries of state- controlled companies. Nevertheless, even if the most optimistic assumptions are applied, the dividend yields for the state-owned utility companies are unlikely to exceed 5%, which is not enough to re-rate the stocks in our view. Downgrades. We have incorporated the proposed tariff freeze into our models, rolled over the target price to end FY13, and taken into account recent 1H13 IFRS reports where possible. This has resulted in our target prices for the Genco and Grid segments falling by an average of 1% and 26%, respectively. We have also downgraded our ratings for Lenenergo prefs, MRSK North-West, and MRSK Siberia from HOLD to SELL.
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Otkritie Capital 3
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
External factors inhibit rise in electricity tariffs Russian government intends to freeze electricity tariffs in 2014, returning to growth in line with inflation in 2015 and beyond. Recently the Russian government approved a freeze on domestic gas and grid tariffs for industrial consumers (though the final decision has not been made yet), while the heat tariffs are likely to grow less than inflation. It also wants to return to inflation- linked tariff growth from July 2015 onwards. There are both internal and external reasons for these decisions, but we believe the external factors, i.e. relating to Russia‟s global competitiveness, are the most pressing. Russia’s high electricity prices are starting to reduce the competitiveness of the rest of the Russian economy. Russia‟s industrial electricity price is 35% below the average EU price and on a par with US prices (excluding taxes). By contrast, the average electricity price paid by Russian households still remains significantly below (62% discount) the average EU household price (excluding taxes). Russian industrial electricity prices are very close to Scandinavian prices (just 10% and 14% below Norway and Finland), almost the same as the average in France (4% discount), and 30% and 47% below UK and German prices, respectively. However, the long-term futures contracts indicate a decline/stagnation in European and Nord Pool electricity prices in the medium term, while long-term electricity prices in the US are unlikely to advance much (recent capacity auctions at PJM Interconnection indicate an oversupply of capacity). Figure 1. EU vs Russian electricity price, Figure 2. Prem/disc of household to industrial EUR/MWh electricity price, EU vs Russia, %
0.30 75%
0.25 60%
0.20 45%
0.15 30%
15% 0.10 0% 0.05 -15% 0.00 -30%
Industrial Domestic RU Industrial RU Domestic EU Russia Sources: Eurostat, Minenergo, Otkritie Capital Research Sources: Eurostat, Minenergo, Otkritie Capital Research
The level of Russia’s electricity prices relative to overseas is the key external factor that is preventing tariff growth. The above dynamics in other countries‟ electricity prices are likely to prevent the Russian government from increasing end-consumer electricity prices – especially given that Russia‟s current electricity prices are already playing a big role in reducing the competitiveness of other sectors in the economy, in particular the aluminum and metal producers. We forecast the end consumer price advancing at a CAGR of 4.4% over the next three years. Given the tariff freeze in 2014 and inflation indexation from July 2015, we forecast that the market electricity price will grow close to 2.3% in 2014, 2.7% in 2015, and 4.1% in 2016. However, the flat-rate electricity price (which includes the electricity market price and capacity price) should increase faster (4.8%, 4.9% and 4.3% respectively), helped by the steeper growth in capacity payments due to the commissioning of new capacity. Given the freeze on grid tariffs in 2014, and then growth in line with inflation, we see the end consumer electricity price increasing 4% in 2014, 4% in 2015, and 5% in 2016.
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Otkritie Capital 4
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Figure 3. Electricity market and gas price growth Figure 4. End-consumer electricity price growth
18% 10% 9% 15% 8% 12% 7% 6% 9% 5% 4% 6% 3% 2% 3% 1%
0% 0% 2012 2013 2014 2015 2016 2013E 2014E 2015E 2016E MRSK growth FGC growth Flat rate price growth capacity price growth Flat rate price growth End consumer price Marketelectricity price growth gas price Sources:,Minenergo, Otkritie Capital Research Sources: Minenergo, Otkritie Capital Research
Cross-subsidies could further damage prospects for the Grid segment Government has no clear strategy on how to solve the “last mile” problem, but Grids are likely to suffer No easy solution to “last mile” problem. We estimate (based on available Eurostat data for FY12), that EU households pay 33% more for electricity than EU industrial consumers (excluding taxes). For comparison, the Russian household pays 25% less than industry, which results in distortions to market signals and tariff regulation of the Grid segment. Industry is effectively subsidising households in Russia, which has been the main issue for the regulators since the start of the electricity market reform. The elimination of this subsidy, which exists in both the wholesale electricity market and grid tariffs, assumes much higher growth in household vs industrial electricity prices. However, this is unlikely to happen given the severe social and political consequences that this implies for the government. Nevertheless, the most recent version of the “last mile” solution currently under discussion in government circles implies removing the ban on industrial consumers from connecting directly to the FGC grids as early as 2014. This implies that the federal and regional budgets should subsidise the revenues that the distribution grid companies would lose. We estimate that approximately 8% of Russian Grid revenue (excluding FGC‟s contribution) – or close to RUB50bn – could be potentially lost if the scheme is realised. We doubt that the regional budgets will be willing to shoulder this in full, implying a potentially significant deterioration in MRSK revenues (particularly MRSK Siberia, MRSK North-West and MRSK Urals). Investors are therefore likely to remain on the sidelines until more clarity emerges. A new capacity market model, thought to benefit most Gencos, is unlikely to emerge Tariff freeze puts liberal sector development on hold Implementation of new capacity market model is likely to be delayed or cancelled. The Ministry on Energy and utility industry representatives are still discussing the pros and cons of two major capacity market models, one of which will be implemented in order to attract investment into the modernisation of existing capacity. The government initially set a deadline of March for approval of the preferred model; this deadline was then moved to 1 July, but as nothing had happened by then, we were expecting some development in September. Instead, to the dismay of investors, the government came up with its proposal to freeze tariffs in 2014. One of the models under discussion is based on long-term bilateral
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Otkritie Capital 5
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
contracts. The other Gazprom model is based on the current capacity market, but with capacity prices for old and new capacities gradually converging to a level that provides an adequate return for the planned modernisation projects. Both models will likely mean some increase in capacity payments for thermal gencos, though the extent of such an increase remains unclear. However, given the government‟s current stance on tariffs, we are unlikely to see a progressive and liberal capacity model approved any time soon. This removes a potentially very strong catalyst in the Gencos space, as both models could significantly boost efficient Gencos‟ EBITDAs on our estimates: for example, a 20% increase in the capacity price would result on average in a 15% one-off increase in EBITDAs, and in an even greater rise in the Gencos‟ bottom lines. As we estimate that the marginal capacity price could be close to RUB380,000-400,000/month/MW (vs the current RUB500,000/month/MW for DMP projects and RUB135,000/month/MW for existing capacity tariffs), the increase could be even greater. Poor corporate governance of state-controlled companies reflects government’s unpredictability Corporate governance in the sector has deteriorated significantly. The unpredictability of government regulation in the utility space has been reflected in the corporate actions of the state-owned companies: ▪ The government‟s current intention that the investment programmes of the utilities stay the same (while freezing tariffs), will significantly increase their leverage and damage the prospect of seeing positive FCF any time soon. On the other hand, the government has stipulated that state-controlled companies pay 25% of their IFRS Net Income as dividends, putting an even bigger stress on the sector‟s debt position. The management of the state-controlled companies seem to have little say in the face of these contradictory pressures. ▪ Creation of Russian Grid has resulted in an inefficient management structure with conflicts of interests and cost growth above inflation. This has been magnified by ad-hoc, short-term tariff regulation (vs a long-term RAB based approach), resulting in a collapse in Grid share prices, which in turn has pushed the privatisation agenda out of sight, in our view. ▪ Government‟s politically-motivated requests for RusHydro and Inter RAO to increase their capex highlight the risk of NPV negative projects being forced onto these state-controlled utilities. 1) Inter RAO has been considering building a 800MW coal fired power plant in the Kaliningrad region for close to $2bn. However, Kaliningrad is not an energy deficient region, and if any of the planned nuclear power plants there (Baltiyskaya APP) or in Belarussia go ahead, then that would make the creation of an 800MW of coal-fired capacity look questionable. 2) RusHydro could also be asked to invest in dam construction in the Far East to lessen the possibility of future flood damage, in light of the considerable damage caused by the severe floods in the region in August-September. These projects lack any economic justification, but as RusHydro controls the whole energy system of the Far East, the company could be burdened with these socially important but unprofitable projects. Credibility of government’s regulation of the sector is in tatters. We believe that the government‟s incoherent strategy and its inclination to use the sector for short-term economic or social problem fixing will deter long-term investors. Even if the government comes up with some positive development in terms of the capacity market or „last mile‟ resolution, their lack of credibility over regulation is likely to cause many investors to sit on the sidelines.
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Otkritie Capital 6
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Government’s new dividend strategy is unlikely to boost the shares The government plans to approve a 25% IFRS payout ratio for state- controlled companies as early as FY13. However, we believe the utility segment could be given some relief, given the contradictory demands for a tariff freeze, maintenance of current capex plans, and higher dividends, i.e. something will have to be adjusted. RusHydro currently pays 25% of its RAS Income; it reported an IFRS Net Loss for FY12, while 1H13 IFRS Net Income was significantly less than the corresponding RAS figure. So, whether the adjusted or reported IFRS Net Income is used as a basis for dividends, it is unlikely that RusHydro‟s dividend yield will rise above 5% even in the most optimistic scenario. Inter RAO and FGC did not pay dividends for FY12 due to reported losses. Both companies have also reported losses in their IFRS releases this year, which mainly relate to non-cash items. Nevertheless, even if adjusted payout parameters are used, we don‟t expect Inter RAO‟s yield to advance above 3%, or FGC‟s to exceed 4.5%. We consider 6% as a fair dividend yield for the utility companies, so the potential rise in dividends is not enough to re-rate the shares. Moreover, given the overall uncertainty surrounding the sector, we believe the market is unlikely to react much to the government‟s new dividend strategy. Figure 5. Gencos potential dividend yields Figure 6. Grids potential dividend yields (very optimistic scenario), FY13 (very optimistic scenario), FY13
8% 20% 7% 18% 16% 6% 14% 5% 12% 4% 10% 3% 8% 6% 2% 4% 1% 2% 0% 0%
2013 2014 2013 2014
Sources: Otkritie Capital Research Sources:, Otkritie Capital Research
We have identified attractive dividend yields for some regional MRSKs in the most optimistic scenario, i.e. when 25% of adjusted IFRS Net Income is paid as dividends. However, given the unlikelihood of significant changes in the MRSKs‟ investment programmes, we believe that the government will resort to some tricks to ensure the sector does not end up paying large dividends.
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Otkritie Capital 7
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Share prices have slumped on poor regulation Utilities’ share prices dived 20% and 35% in FY12 and YtD, respectively Utilities’ share prices took a big hit in 2012 when the government reversed its tariff decisions and was unable to come up with a favourable sector strategy. Stocks declined on average by 23%, with Inter RAO down 29% and RusHydro down 27%. Figure 7. Gencos share price performance, FY12 Figure 8. Grids share price performance, FY12
30 20 20 10 10 0 -10 0 -20 -10 -30 -20 -40 -30 -50 -40 -60
-50 0% FGC
-60
MOESK
Lenenergo
MRSK Urals MRSK
MRSK Volga MRSK
MRSK South MRSK RussianGrid
MRSK Center
MRSK Siberia MRSK
EoNR
TGK-2 TGK-1 TGK-5 TGK-6 TGK-7 TGK-9
OGK-2
Quadra
TGK-14
Lenenergo PREF Lenenergo
Russian Grid pref RussianGrid
MRSK North-West MRSK
InterRAO RusHydro
Mosenergo
MRSK Center&Volga MRSK EnelOGK-5 Y12 MICEX PWR MICEX Y12 MICEX PWR MICEX
Sources: Bloomberg, Otkritie Capital Research Sources: Bloomberg, Otkritie Capital Research
In 2012, FGC declined 35% while Russian Grid fell 18%, in line with the average decline in MRSK share prices of 18%. The utilities‟ stocks have continued to deliver a dismal performance this year, declining 35% YtD, again driven by big slumps in the state-owned companies RusHydro (-25%), Inter RAO (-53%), FGC (-50%), and Russian Grid (-51%). Only a few names showed a relatively strong performance, in particular EoNR (down just 4%), TGK-1 (-1%), while TGK-7 and TGK-14 were up 8% and 8% respectively. Figure 9. Gencos share price performance, YtD Figure 10. Grids share price performance, YtD
20 0 10 -10 0 -20 -10 -30 -20 -40 -30 -50 -40 -60
-50 0%
-60 FGC
MOESK
Lenenergo
MRSK Urals MRSK
MRSK Volga MRSK
MRSK South MRSK RussianGrid
MRSK Center
MRSK Siberia MRSK
EoNR
TGK-9 TGK-1 TGK-2 TGK-5 TGK-6 TGK-7
OGK-2
Quadra
TGK-14
Lenenergo PREF Lenenergo
Russian Grid pref RussianGrid
MRSKNorth-West
InterRAO RusHydro
Mosenergo
MRSK Center&Volga MRSK EnelOGK-5 Year-to-date MICEX PWR MICEX Year-to-date MICEX PWR MICEX
Sources: Bollmberg, Otkritie Capital Research Sources: Bloomberg, Otkritie Capital Research
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Otkritie Capital 8
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Privatisation or nationalisation? Collapse in utility stocks could drive the government towards nationalisation The sector’s slump has pushed market valuations so low as to make privatisation in the utility space unfeasible, we believe, while also making the resurrection of RAO UES in some form more probable. We believe that the plan outlined by Igor Sechin in May last year – implying full consolidation of the Grids, creation of a retail monopoly, and a greater role for Inter RAO in the Genco segment – could be on agenda. The government‟s „privatisation‟ plan envisioned a consolidation of all of Inter RAO stakes currently held by state- controlled utilities and Rosimushestvo (the state property agency) on the basis of Rosneftegaz, which could boost Rosneftegaz‟s influence in the utility space. This, in turn, could give greater strength to the drive towards consolidation of utility assets into government hands. However, the government‟s unpredictable regulation of the sector, along with its apparent strategy to use the sector as a tool for attaining short-term economic and social goals, greatly lessens the appeal of any potential stake that the government might offer for privatisation. We therefore do not envisage the privatisation of even one MRSK in 2014, as the government had previously planned. Moreover, we view the current structure of Russian Grid as temporary. We were previously expecting a more liberal scenario whereby the MRSKs would be privatised over the medium term, resulting in Russian Grid being represented by FGC and some MRSKs that are difficult to privatise (MRSK of North Caucasus for example). However, the diminished privatisation prospects mean that the other scenario, i.e. Russian Grid consolidates FGC and possibly some MRSKs after buying out the minorities, could be on the horizon. It is also possible that the current structure remains for the long-term, but this would mean missing the chance to improve the efficiency of the Grid segment through the privatisation of the MRSKs to reputable strategic investors, which could then be used as the benchmark to properly regulate the remaining companies. But the government’s long-term Grid strategy is unfeasible without privatisation, we believe. Though the government has resorted to ad-hoc, short-term regulation, it nevertheless revealed its long-term strategy for the Grid segment earlier this year, which mostly aims at cutting operating expenses (per consumer) by 40% in 2017 (vs 2012), reducing energy losses to 7.5% for distribution grids and to 3.5% for FGC. The strategy also envisages a decrease in the market shares of territorial grid companies from 31% to 24%, with their further consolidation into MRSKs. However, the strategy has failed to describe how it would achieve these goals. We believe that a 40% cut to operational costs would require a big drive against corruption, which could only be achieved through privatisation to a foreign strategic investor. Though, technologically, a reduction in energy losses to 3.5% for FGC and to 7.5% for the distribution grids could be achieved (given the new investments already made in the sector and the relatively low level of losses that were in the former Soviet Union), this goal would require the eradication of commercial (mainly theft) losses in some regional MRSKs, which could be partly incorporated into an anti-corruption drive. We therefore think that privatisation (and minimising corruption) is the major condition for the government delivering on its strategy, but the prospect of this happening looks low.
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Otkritie Capital 9
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Valuation Downgrades on much lower 2014 forecasts after incorporating tariff freeze We currently assume that the domestic gas price and grid tariffs will be frozen for one year, i.e. no indexation in July 2014. In 2015 we have assumed that the average grid tariff grows in line with inflation, while the domestic gas price increases more slowly than inflation due to the competition that Gazprom is facing from independent gas producers in the domestic gas market. Given that the government is pressing the monopolies not to reduce their capex, we believe their investment programmes will stay close to previously approved, thus the regulator is likely to favour higher debt leverage rather than more attractive FCF. Moreover, we note that if it is decided that capex plans are to be changed, a lot of time would be required to discuss and approve the new programmes among the Ministry of Energy, regional energy committees and the companies involved. We have therefore not changed our capex projections much, despite the big fall in tariff growth. However, we have slightly adjusted our capex for Lenenergo (c. 10% decrease) as the company has a special tariff regime among the MRSKs. We have also slightly lowered our capex assumption for Russian Grid (keeping it almost the same, but have moved some projects to later dates). We have also rolled over our target prices to the end of FY14 and incorporated 1H13 IFRS results for some of the companies. Their incorporation explains why we have increased our profit projections for companies like TGK-9 and TGK-2. Significant changes in the bottom lines for some TGKs are also explained by the low base of their expected bottom lines in 2014 and 2015. Figure 11. EBITDA and Net Income drop vs Figure 12. EBITDA and Net Income drop vs previous forecast, Gencos previous forecast, Grids
40% 0% 30% -10% 20% -20% 10% -30% 0% -40% -10% -50% -20% -60% -30% -70% -40% -50%
EBITDA 2014 EBITDA 2015 Net Income 2014 Net Inocme 2015 EBITDA 2014 EBITDA 2015 Net Income 2014 Net Inocme 2015 Sources: Otkritie Capital Research Sources: Otkritie Capital Research
The changes to our models have led to substantial declines in our EBITDA and Net Profit forecasts for some companies, particularly in the Grid segment. As fuel (mostly gas) is the major contributor to the Gencos‟ cost structure, while fixed costs have been efficiently controlled by the major Gencos, we don‟t expect the tariff decision to have a big impact on the FY14-15 financials of the efficient Gencos. On the other hand, the cost structure of FGC, Russian Grid, and regional MRSKs are mostly inflationary, and these companies have not been successful in controlling their fixed costs, especially employee costs. Thus the effect of the tariff freeze is more profound for the Grids than for the Gencos. We have left our WACC assumptions unchanged, but switched to DCF-derived target prices for the Grid segment from the previous combined RAB and DCF- based approach (as no RAB based regulation exists in Russia). On the back of the above changes, our end FY14 target price for the Gencos segment has dropped 1% vs our previous FY13 target price, while for the Grid segment the average decline is more profound at 26%, which reflects our argument that Grids are more sensitive to the tariff freeze.
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Otkritie Capital 10
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Figure 13. Changes in EBITDA, Net Income, target prices and ratings (current vs previous estimates)
Target Price, RUB Rating Company Upside Old New Old New OGK-2 0.38 0.40 HOLD HOLD 33% EoNR 3.5 3.43 BUY BUY 36% Enel OGK-5 1.8 1.89 HOLD HOLD 53% TGK-1 0.01 0.0104 BUY BUY 50% TGK-2 0.0018 0.0015 HOLD HOLD 11% Mosenergo 1.97 1.9 BUY BUY 77% Quadra 0.0034 0.0032 HOLD HOLD 8% TGK-5 0.0022 0.0022 SELL SELL -26% TGK-6 0.0023 0.0025 SELL SELL -18% TGK-7 1.49 1.64 HOLD HOLD -4% TGK-9 0.0026 0.0024 HOLD HOLD -18% TGK-14 0.0019 0.0019 HOLD HOLD 16% Inter RAO 0.018 0.015 HOLD HOLD 29% RusHydro 0.7 0.7 HOLD HOLD 29% FGC 0.14 0.10 HOLD HOLD -2% MOESK 1.17 1.11 HOLD HOLD -1% Lenenergo 5.04 3.60 HOLD HOLD -10% Lenenergo PREF 13.68 9.81 HOLD SELL -18% MRSK Center 0.48 0.30 HOLD HOLD -7% MRSK North-West 0.05 0.03 HOLD SELL -20% MRSK Center&Volga 0.14 0.12 HOLD HOLD 2% MRSK Urals 0.16 0.13 HOLD HOLD -6% MRSK Volga 0.08 0.05 HOLD HOLD 11% MRSK Siberia 0.09 0.06 HOLD SELL -22% MRSK South 0.04 0.03 HOLD HOLD -13% Russian Grid 1.32 1.04 HOLD HOLD 3% Russian Grid pref 1.12 0.88 HOLD HOLD 1%
Sources: Bloomberg, Otkritie Capital Research
As a result we have kept our ratings unchanged in the Gencos space, but have downgraded Lenenergo pref, MRSK North-West, and MRSK Siberia to SELL from HOLD, mostly on valuation grounds. We consider the Grids as too risky to touch in light of the government‟s unpredictable regulation and the inefficient corporate structure of the segment. By contrast, the Genco segment is relatively transparent (apart from state- owned RusHydro and Inter RAO) and includes some attractive corporate stories that could result in their share prices putting in a fair performance. ▪ EoNR [BUY, TP RUB3.43] EoNR has been outperforming the overall market for several years. We currently expect a positive dividend surprise (given the parent‟s call for a FY12 payout of 100%), though model a conservative 50% payout ratio (5.5% dividend yield). If the company increases its payout ratio to 80%, the implied yield of 9% would provide upside support for the shares. ▪ TGK-1 [BUY TP RUB0.0104] is set to beat consensus forecasts for FY13, due to its solid operational performance YtD. We forecast a dividend yield for FY13 of slightly below 5%, while the recent development in its heat infrastructure business could result in higher capex subsidies, and future dividend yields of above 6%. ▪ OGK-2 [HOLD, TP RUB0.40]. Though we have a HOLD rating and investors are unlikely to see any dividends in the near term, the company trades at just 50% of the money it has already invested under the capacity supply agreements. Moreover, it is likely to beat consensus and management guidance for FY13. We forecast strong 9M13 results, which should be followed by consensus and management upgrades and provide a positive catalyst for the shares. However, the company has historically delivered both negative and positive earnings surprises, so we will not upgrade until the 9M13 RAS figures have been released.
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 11
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
▪ Mosenergo [BUY, TP RUB1.90] is a speculative BUY, as we believe that after Gazprom Energoholding‟s acquisition of MOEK, Mosenergo could benefit not only from synergies related to the deal, but also from a possible increase in heat tariffs for its power plants as a result some MOEK boilers being decommissioned. We therefore estimate four-year CAGRs of 10% for EBITDA and 20% for the bottom line. We remain cautious on RusHydro and Inter RAO as the government appears to be using them as a tool to reach some of its social and political goals, resulting in unpredictable future capex and a very obscure investment case for the minority shareholders. Figure 14. Gencos’ Valuation Table
Current Target Market Upside, EV/EBITDA P/E Company Ticker Price, price, Rating Cap, % RUB RUB $mn '12 '13E '14E '12 '13E '14E OGK-2 OGKB 0.30 0.40 33% HOLD 548 5.0 3.8 5.2 10.9 4.5 6.1 OGK-4 EONR 2.53 3.43 36% BUY 4,921 5.3 5.5 4.9 8.8 9.5 8.6 OGK-5 OGKE 1.23 1.89 53% HOLD 1,342 4.7 4.0 4.0 7.6 5.6 5.9 OGKs average 5.0 4.4 4.7 9.1 6.5 6.9
TGK-1 TGKA 0.007 0.010 50% BUY 825.9 4.5 4.0 3.5 4.3 4.2 3.6 TGK-2 TGKB 0.001 0.002 19% HOLD 63.0 7.3 6.8 6.1 nm 13.1 6.9 Mosenergo MSNG 1.073 1.900 77% BUY 1,315.3 2.4 2.7 2.5 6.8 6.8 7.7 TGK-4 TGKD 0.0029 0.0032 8% HOLD 178.8 8.5 5.8 6.7 nm nm nm TGK-5 TGKE 0.0029 0.0022 -24% SELL 109.9 94.1 131.6 24.4 nm nm nm TGK-6 TGKF 0.003 0.002 -17% SELL 171.3 16.9 6.1 5.6 nm 26.1 18.0 TGK-7 TGKG 1.70 1.64 -4% HOLD 1,573.5 12.0 5.9 5.6 49.0 13.9 11.6 TGK-9 TGKI 0.0029 0.0024 -17% HOLD 702.2 10.6 17.5 13.7 nm nm nm TGK-14 TGKN 0.0016 0.0019 16% HOLD 68.0 3.8 3.5 2.7 22.9 30.7 5.6 TGKs average 17.8 20.4 7.9 20.8 15.8 8.9
Inter RAO IUES 0.011 0.015 28% HOLD 3,416.3 5.1 4.7 4.8 n/m 9.0 9.4 EM thermal average 9.7 9.4 8.3 23.8 22.4 18.5
DM thermal average 7.5 8.8 7.4 12.8 18.9 14.8
RusHydro HYDR 0.54 0.70 29% HOLD 5,314.9 4.4 4.5 3.8 nm 5.6 4.5 EM hydro average 8.2 7.2 12.4 21.2 51.3 13.8
DM hydro average 6.8 7.1 7.1 11.0 11.6 12.3
Sources: Bloomberg, Otkritie Capital Research
Figure 15. Grids’ Valuation Table
Current Target Market Upside, EV/EBITDA P/E Company Ticker Price, price, Rating Cap, % RUB RUB $mn '12 '13E '14E '12 '13E '14E FGC FEES 0.10 0.10 -2% HOLD 3,945.5 3.9 4.0 4.3 18.7 5.5 5.8 Foreign peers average for FGC 7.5 4.0 3.6 8.0 7.4 6.3
MOESK MSRS 1.12 1.11 -1% HOLD 1,675.4 2.3 2.8 3.5 3.0 3.5 5.1 Lenenergo LSNG 4.00 3.60 -10% HOLD 114.2 4.3 3.7 4.2 20.4 1.8 2.7 Lenenergo PREF LSNGP 12.00 9.81 -18% SELL 0.0 MRSK Center MRKC 0.32 0.30 -7% HOLD 416.8 2.5 2.1 2.3 2.6 1.8 1.9 MRSK North-West MRKZ 0.04 0.03 -20% SELL 124.2 3.7 3.5 4.0 10.2 nm nm MRSK Center&Volga MRKP 0.12 0.12 7% HOLD 399.7 3.6 2.7 3.7 7.4 4.3 8.7 MRSK Urals MRKU 0.14 0.13 -6% HOLD 364.3 3.2 3.3 3.5 38.4 42.7 nm MRSK Volga MRKV 0.04 0.05 11% HOLD 245.1 2.1 2.3 2.6 2.7 2.4 2.7 MRSK Siberia MRKS 0.08 0.06 -22% SELL 213.6 2.7 3.2 3.3 8.3 nm nm MRSK South MRKA 0.04 0.03 -13% HOLD 54.1 4.1 5.3 4.6 1.8 nm 3.3 Russian Grid MRKH 1.01 1.04 -4% HOLD 1,282.3 2.2 2.3 2.7 5.3 3.8 5.0 Russian Grid pref MRKHP 0.88 0.88 -6% HOLD
MRSKs average 3.1 3.1 3.4 10.0 8.6 4.2
Foreign peers average for MRSKs 29.5 16.0 15.6 32.3 25.9 22.8
Sources: Bloomberg, Otkritie Capital Research
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Otkritie Capital 12
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Finan cial fo recasts RusHydro: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 50% 130,000 Revenues 534,876 371,874 305,761 340,876 369,232 389,409 45% 120,000 Depreciation 11,354 16,421 18,232 20,911 22,235 23,629 EBITDA 78,624 76,972 62,954 73,989 86,232 92,566 40% 110,000 Operating profit (EBIT) 51,116 30,585 (2,482) 53,078 63,997 68,936 35% 100,000 Net interest expense (5,540) (2,209) (1,379) (7,063) (7,621) (6,621) 30% 90,000 Non-op. revenue (expenses) (8,310) (3,436) (14,197) 0 0 0 25% 80,000 Pretax profit 18,494 43,712 (18,058) 46,015 56,376 62,315 20% 70,000 Taxes (8,095) (11,934) (5,315) (9,203) (11,275) (12,463) 15% 60,000 Minority interest 1,260 (1,918) (2,737) 3,216 3,788 4,214 10% 50,000 Net income 10,399 29,493 (23,373) 36,812 45,101 49,852 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 73,201 (68,744) (10,440) 4,646 3,411 1,941 Provisions and write-offs 0 0 0 0 0 0 Other (96) (144) (54) 0 0 0 Cash flows, RUBmn Operating cashflow 50,515 65,015 59,666 35,257 45,547 54,162 Capex (70,519) (81,905) (82,150) (107,148) (76,052) (69,315) Disposals (Acquisitions) 0 0 0 0 0 0 60,000 Investing cashflow (89,988) (80,865) (120,740) (101,769) (70,673) (63,937) 40,000 Equity 6,284 3,338 51,498 0 0 0 20,000 Debt 16,362 39,752 17,127 28,965 (15,000) (10,000) 0 (20,000) Financing cashflow 13,397 35,768 53,517 37,774 16,161 9,644 (40,000) Net change in cash (25,967) 19,995 (7,557) (28,739) (8,966) (131) (60,000) Balance sheet (80,000) Cash & equivalents 22,569 47,337 39,819 11,080 2,115 1,984 (100,000) (120,000) Current assets 164,727 153,594 193,047 172,243 169,685 174,114 (140,000) PP&E 518,476 568,629 604,461 690,698 721,453 753,579 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 61,790 89,560 57,239 57,239 57,239 57,239 Operating cash flow Investing cash flow Total assets 744,993 811,783 854,747 920,180 948,376 984,931 Current liabilities 69,725 113,066 178,972 125,509 127,005 128,624 S-T Debt 31,187 21,414 73,752 17,000 15,500 14,500 L-T Debt 51,579 102,624 67,283 153,000 139,500 130,500 Momentum Other L-T liabilities 10,506 13,001 14,035 14,035 14,035 14,035 30% Shareholders funds 509,989 498,490 514,650 544,614 581,026 620,748 20% Total liabilities & equity 744,993 811,783 854,747 920,180 948,376 984,931 10% Net Debt 60,197 76,701 101,216 158,920 152,885 143,016 0% Margins and profitability 0.10 EBIT margin 9.6% 8.2% (0.8%) 15.6% 17.3% 17.7% 0.20 EBITDA margin 14.7% 20.7% 20.6% 21.7% 23.4% 23.8% 0.30 Net margin 1.9% 7.9% (7.6%) 10.8% 12.2% 12.8% 0.40 ROE 2.0% 5.9% (4.5%) 6.8% 7.8% 8.0% 0.50 ROA 1.4% 3.6% (2.7%) 4.0% 4.8% 5.1% 0.60 ROIC 6.3% 3.8% (0.3%) 5.4% 6.2% 6.5% 0.70 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 363% -30% -18% 11% 8% 5% Revenue growth EPS growth EBITDA growth 51% -2% -18% 18% 17% 7% EPS growth -67% 184% n/m n/m 23% 11% Liquidity and solvency Valuation Cash ratio 0.3 0.4 0.2 0.1 0.0 0.0 Current ratio 2.4 1.4 1.1 1.4 1.3 1.4 16 Interest coverage (9.2) (13.8) 1.8 (7.5) (8.4) (10.4) 14 Debt/Equity 0.2 0.2 0.3 0.3 0.3 0.2 12 Debt/Total assets 0.1 0.2 0.2 0.2 0.2 0.1 10 Net debt / EBITDA 0.8 1.0 1.6 2.1 1.8 1.5 8 Valuation 6 P/E 14.4 5.1 nm 5.6 4.5 4.1 P/CE 6.9 3.3 nm 3.5 3.0 2.8 4 P/BV 0.3 0.3 0.4 0.4 0.4 0.3 2 EV/Sales 0.4 0.7 0.9 1.0 0.9 0.8 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 3.0 3.3 4.4 4.5 3.8 3.5 Dividend yield, (ords) 1.7% 1.7% nm 1.8% 2.4% 2.9% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.04 0.11 (0.06) 0.10 0.12 0.14 DPS, ords 0.01 0.01 (0.01) 0.01 0.01 0.02 DPS, prefs ------BVPS 1.89 1.85 1.40 1.48 1.58 1.69
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 13
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Inter RAO: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 11% 70,000 Revenues 464,386 536,244 556,189 631,360 666,949 696,854 Depreciation 7,045 12,503 16,596 13,056 15,416 17,027 10% 60,000 EBITDA 33,600 41,700 26,516 33,282 34,916 35,860 9% 50,000 Operating profit (EBIT) 29,185 (4,483) (31,738) 20,226 19,499 18,833 8% 40,000 Net interest expense (3,505) 56,307 (6,889) (4,146) (4,075) (4,468) 7% 30,000 Non-op. revenue (expenses) 0 0 11,645 0 0 0 Pretax profit 25,680 51,824 (24,273) 16,080 15,424 14,365 6% 20,000 Taxes (7,041) (10,367) 1,918 (3,216) (3,085) (2,873) 5% 10,000 Minority interest 0 (3,109) 1,677 (965) (925) (862) 4% 0 Net income 18,639 41,457 (22,355) 12,864 12,339 11,492 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 1,126 3,264 (43,067) (13,444) (1,826) (1,232) Provisions and write-offs 0 0 0 0 0 0 Other (14) 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 24,176 46,001 6,488 43,510 33,657 34,219 Capex (17,231) (26,430) (48,884) (59,000) (40,267) (28,020) 60,000 Disposals (Acquisitions) 0 0 0 0 0 0 Investing cashflow (18,874) (25,170) 8,768 (57,799) (39,542) (27,528) 40,000 Equity 24,880 50 (5,271) 0 0 0 20,000 Debt (6,904) (4,709) 4,245 589 2,000 (7,000) Financing cashflow 11,402 (8,864) (11,822) (4,758) (3,443) (13,811) 0 Net change in cash 16,561 12,249 4,531 (19,047) (9,328) (7,120) (20,000) Balance sheet Cash & equivalents 31,270 43,518 48,049 29,002 19,674 12,555 (40,000) Current assets 98,117 203,825 170,614 141,347 135,806 131,815 (60,000) PP&E 118,705 227,525 282,761 328,705 353,555 364,548 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 6,766 4,751 5,177 5,177 5,177 5,177 Operating cash flow Investing cash flow Total assets 249,090 531,916 528,634 545,310 564,620 571,623 Current liabilities 68,781 65,459 105,974 112,763 118,997 121,189 S-T Debt 5,936 3,458 15,034 18,600 19,220 17,050 L-T Debt 32,598 44,514 44,377 41,400 42,780 37,950 Momentum Other L-T liabilities 2,374 12,347 7,033 7,033 7,033 7,033 20% Shareholders funds 116,537 347,480 349,115 361,014 371,785 380,564 Total liabilities & equity 249,090 531,916 528,634 545,310 564,620 571,623 10% Net Debt 7,264 4,454 11,362 30,998 42,326 42,445 0% Margins and profitability 0.10 EBIT margin 6.3% (0.8%) (5.7%) 3.2% 2.9% 2.7% EBITDA margin 7.2% 7.8% 4.8% 5.3% 5.2% 5.1% 0.20 Net margin 4.0% 7.7% (4.0%) 2.0% 1.9% 1.6% 0.30 ROE 16.0% 11.9% (6.4%) 3.6% 3.3% 3.0% 0.40 ROA 7.5% 7.8% (4.2%) 2.4% 2.2% 2.0% ROIC 15.7% (0.8%) (6.8%) 4.0% 3.7% 3.4% 0.50 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 878% 15% 4% 14% 6% 4% Revenue growth EPS growth EBITDA growth 612% 24% -36% 26% 5% 3% EPS growth 398% 122% n/m n/m -4% -7% Liquidity and solvency Valuation Cash ratio 0.5 0.7 0.5 0.3 0.2 0.1 Current ratio 1.4 3.1 1.6 1.3 1.1 1.1 35 Interest coverage (8.3) (0.1) 4.6 (4.9) (4.8) (4.2) 30 Debt/Equity 0.3 0.1 0.2 0.2 0.2 0.1 25 Debt/Total assets 0.2 0.1 0.1 0.1 0.1 0.1 Net debt / EBITDA 0.2 0.1 0.4 0.9 1.2 1.2 20 Valuation 15 P/E 6.2 2.8 nm 9.0 9.4 10.1 10 P/CE 4.5 2.1 nm 4.5 4.2 4.1 5 P/BV 1.0 0.3 0.3 0.3 0.3 0.3 EV/Sales 0.3 0.2 0.2 0.2 0.2 0.2 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 3.9 3.1 5.1 4.7 4.8 4.6 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.6% 1.6% 2.5% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 0.00 (0.00) 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.01 0.04 0.04 0.04 0.04 0.04
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 14
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
OGK-2: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 20% 40,000 Revenues 96,463 104,896 104,213 118,186 119,412 134,619 18% 35,000 Depreciation 3,683 4,114 4,880 5,989 6,742 7,642 EBITDA 10,544 6,021 10,480 16,067 15,215 22,683 16% 30,000 Operating profit (EBIT) 7,359 2,218 6,449 11,187 9,226 15,941 14% 25,000 Net interest expense (947) (1,796) (2,496) (2,072) (2,490) (3,260) 12% 20,000 Non-op. revenue (expenses) 0 0 0 0 0 0 10% 15,000 Pretax profit 6,412 422 3,953 9,116 6,736 12,681 8% 10,000 Taxes 1,742 412 930 1,823 1,347 2,536 6% 5,000 Minority interest 0 0 0 0 0 0 4% 0 Net income 4,670 10 3,023 7,292 5,389 10,144 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 4,477 4,384 3,683 1,793 176 1,684 Provisions and write-offs 0 0 0 0 0 0 Other 63 516 (137) 0 0 0 Cash flows, RUBmn Operating cashflow 10,584 940 12,890 12,451 13,692 18,463 Capex (11,400) (17,146) (19,166) (19,153) (27,720) (18,847) 20,000 Disposals (Acquisitions) 0 0 (1,048) 0 0 0 15,000 Investing cashflow (8,222) (17,197) (22,346) (18,948) (27,515) (18,642) 10,000 Equity 0 0 23,001 0 0 0 5,000 Debt 612 17,402 (7,315) 6,435 17,000 5,000 0 Financing cashflow 250 11,254 12,857 4,158 13,976 1,238 (5,000) Net change in cash 2,612 (5,003) 3,401 (2,338) 153 1,059 (10,000) Balance sheet (15,000) (20,000) Cash & equivalents 5,362 359 3,760 1,422 1,575 2,634 (25,000) Current assets 20,761 20,997 29,237 29,342 29,900 33,243 (30,000) PP&E 92,103 106,497 114,101 128,374 150,105 162,209 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 4,789 4,509 6,294 6,294 6,294 6,294 Operating cash flow Investing cash flow Total assets 117,653 132,003 149,632 164,010 186,299 201,746 Current liabilities 8,059 13,681 11,316 22,537 28,284 28,349 S-T Debt 10 5,602 3,314 13,885 19,403 18,868 L-T Debt 15,135 27,168 20,251 16,115 27,597 33,132 Momentum Other L-T liabilities 7,560 8,679 9,321 9,321 9,321 9,321 100% Shareholders funds 86,899 82,474 108,744 116,037 121,097 130,944 80% Total liabilities & equity 117,653 132,003 149,632 164,010 186,299 201,746 60% Net Debt 9,782 32,411 19,805 28,578 45,425 49,366 40% Margins and profitability 20% EBIT margin 7.6% 2.1% 6.2% 9.5% 7.7% 11.8% 0% EBITDA margin 10.9% 5.7% 10.1% 13.6% 12.7% 16.8% 0.2 Net margin 4.8% 0.0% 2.9% 6.2% 4.5% 7.5% 0.4 ROE 5.4% 0.0% 2.8% 6.3% 4.5% 7.7% 0.6 ROA 4.0% 0.0% 2.0% 4.4% 2.9% 5.0% 0.8 ROIC 5.6% 1.5% 3.8% 6.4% 4.7% 7.5% 1.0 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 147% 9% -1% 13% 1% 13% Revenue growth EPS growth EBITDA growth 441% -43% 74% 53% -5% 49% EPS growth 327% -100% 29,655% 141% -26% 88% Liquidity and solvency Valuation Cash ratio 0.7 0.0 0.3 0.1 0.1 0.1 Current ratio 2.6 1.5 2.6 1.3 1.1 1.2 25 Interest coverage (7.8) (1.2) (2.6) (5.4) (3.7) (4.9) Debt/Equity 0.2 0.4 0.2 0.3 0.4 0.4 20 Debt/Total assets 0.1 0.2 0.2 0.2 0.3 0.3 15 Net debt / EBITDA 0.9 5.4 1.9 1.8 3.0 2.2 Valuation 10 P/E 5.4 nm 10.9 4.5 6.1 3.3 P/CE 3.0 8.0 4.2 2.5 2.7 1.9 5 P/BV 0.3 0.4 0.3 0.3 0.3 0.3 EV/Sales 0.4 0.6 0.5 0.5 0.7 0.6 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 4.1 10.9 5.0 3.8 5.2 3.6 Dividend yield, (ords) 0.6% 0.0% 0.0% 1.0% 0.9% 2.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.06 0.00 0.03 0.07 0.05 0.09 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.01 DPS, prefs ------BVPS 1.04 0.75 0.98 1.05 1.10 1.19
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 15
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
EoNR: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 45% 65,000 Revenues 50,322 66,089 75,023 80,474 87,227 95,344 Depreciation 2,340 5,206 8,249 8,925 9,461 9,671 40% 55,000 EBITDA 14,574 22,899 29,093 29,404 32,085 35,342 35% 45,000 Operating profit (EBIT) 12,234 17,736 20,844 20,478 22,624 25,671 Net interest expense 348 442 1,980 775 775 825 30% 35,000 Non-op. revenue (expenses) 0 0 0 0 0 0 25% 25,000 Pretax profit 12,582 18,177 22,824 21,254 23,400 26,496 Taxes (2,332) (3,580) (4,569) (4,251) (4,680) (5,299) 20% 15,000 Minority interest 0 0 0 0 0 0 15% 5,000 Net income 10,251 14,597 18,255 17,003 18,720 21,197 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,839) (1,140) 1,842 (2,998) 1,268 645 Provisions and write-offs 0 0 0 0 0 0 Other (53) 153 (117) 0 0 0 Cash flows, RUBmn Operating cashflow 13,208 22,527 23,462 28,151 26,137 29,397 Capex (16,956) (13,091) (11,270) (16,900) (13,400) (5,244) 30,000 Disposals (Acquisitions) 0 0 0 0 0 0 Investing cashflow (13,431) (12,349) (24,848) (16,075) (12,575) (4,418) 20,000 Equity 0 0 0 0 0 0 10,000 Debt 0 0 0 1,000 (1,000) 0 Financing cashflow (0) (0) (3,395) (17,305) (9,552) (9,360) 0 Net change in cash (215) 10,255 (4,711) (5,228) 4,011 15,619 (10,000) Balance sheet Cash & equivalents 269 10,524 5,813 585 4,596 20,215 (20,000) Current assets 22,964 32,310 41,517 35,250 40,412 56,795 (30,000) PP&E 79,600 86,716 88,626 96,601 100,540 96,113 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 649 1,247 3,453 3,453 3,453 3,453 Operating cash flow Investing cash flow Total assets 103,213 120,274 133,595 135,304 144,405 156,361 Current liabilities 6,174 6,528 5,262 7,662 7,105 7,224 S-T Debt 0 0 0 440 0 0 L-T Debt 0 0 0 560 0 0 Momentum Other L-T liabilities 2,888 5,270 5,460 5,460 5,460 5,460 90% Shareholders funds 94,136 108,470 122,868 121,616 131,834 143,671 80% Total liabilities & equity 103,213 120,274 133,595 135,304 144,405 156,361 70% Net Debt (269) (10,524) (5,813) 415 (4,596) (20,215) 60% Margins and profitability 50% 40% EBIT margin 24.3% 26.8% 27.8% 25.4% 25.9% 26.9% 30% EBITDA margin 29.0% 34.6% 38.8% 36.5% 36.8% 37.1% 20% Net margin 20.4% 22.1% 24.3% 21.1% 21.5% 22.2% 10% ROE 10.9% 13.5% 14.9% 14.0% 14.2% 14.8% 0% ROA 9.9% 12.1% 13.7% 12.6% 13.0% 13.6% 0.10 ROIC 10.1% 13.7% 13.6% 12.9% 13.6% 15.9% 0.20 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 23% 31% 14% 7% 8% 9% Revenue growth EPS growth EBITDA growth 68% 57% 27% 1% 9% 10% EPS growth 86% 42% 25% -7% 10% 13% Liquidity and solvency Valuation Cash ratio 0.0 1.6 1.1 0.1 0.6 2.8 Current ratio 3.7 4.9 7.9 4.6 5.7 7.9 30 Interest coverage 35.1 40.2 10.5 26.4 29.2 31.1 25 Debt/Equity 0.0 0.0 0.0 0.0 0.0 0.0 Debt/Total assets 0.0 0.0 0.0 0.0 0.0 0.0 20 Net debt / EBITDA (0.0) (0.5) (0.2) 0.0 (0.1) (0.6) 15 Valuation P/E 15.7 11.0 8.8 9.5 8.6 7.6 10 P/CE 12.8 8.1 6.1 6.2 5.7 5.2 5 P/BV 1.7 1.5 1.3 1.3 1.2 1.1 EV/Sales 3.2 2.3 2.1 2.0 1.8 1.5 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 11.0 6.6 5.3 5.5 4.9 4.0 Dividend yield, (ords) 0.0% 2.3% 11.3% 5.3% 5.8% 6.6% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.16 0.23 0.29 0.27 0.30 0.34 DPS, ords 0.00 0.06 0.29 0.13 0.15 0.17 DPS, prefs ------BVPS 1.49 1.72 1.95 1.93 2.09 2.28
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 16
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Enel OGK-5: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 26% 19,000 Revenues 52,561 60,102 66,546 72,703 74,719 76,906 Depreciation 2,801 3,328 4,816 5,120 5,432 5,872 24% 17,000 EBITDA 8,626 13,550 14,495 16,378 15,796 15,717 22% 15,000 Operating profit (EBIT) 5,648 8,724 9,679 11,259 10,364 9,845 Net interest expense (1,049) (2,452) (2,640) (1,760) (1,431) (1,251) 20% 13,000 Non-op. revenue (expenses) 0 0 0 0 0 0 18% 11,000 Pretax profit 4,600 6,272 7,040 9,499 8,933 8,595 Taxes (905) (1,308) (1,487) (1,900) (1,787) (1,719) 16% 9,000 Minority interest 0 (11) (15) (20) (19) (19) 14% 7,000 Net income 3,695 4,964 5,553 7,599 7,147 6,876 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (848) (5) (2,414) 3,546 (616) (425) Provisions and write-offs 0 0 0 0 0 0 Other (444) 254 432 0 0 0 Cash flows, RUBmn Operating cashflow 11,549 12,567 15,282 10,932 14,625 14,423 Capex (14,123) (17,321) (10,803) (7,600) (7,800) (11,000) 20,000 Disposals (Acquisitions) 0 0 0 0 0 0 15,000 Investing cashflow (14,062) (17,267) (10,566) (6,826) (7,026) (10,226) Equity 77 0 0 0 0 0 10,000 Debt 3,035 10,853 (1,243) (4,319) (3,000) (1,000) 5,000 Financing cashflow 2,038 8,901 (4,104) (6,853) (7,485) (5,169) 0 Net change in cash (475) 4,200 612 (2,746) 114 (972) (5,000) Balance sheet (10,000) Cash & equivalents 537 4,737 5,350 2,604 2,719 1,747 (15,000) Current assets 10,537 16,272 18,306 15,794 16,524 16,041 (20,000) PP&E 88,139 101,004 108,132 110,613 112,981 118,110 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,906 1,701 1,425 1,425 1,425 1,425 Operating cash flow Investing cash flow Total assets 100,582 118,976 127,864 127,832 130,930 135,576 Current liabilities 12,487 9,336 17,460 11,779 12,678 13,482 S-T Debt 5,494 1,289 5,241 2,872 2,541 2,430 L-T Debt 15,245 30,891 25,078 23,128 20,459 19,570 Momentum Other L-T liabilities 7,878 8,594 9,785 9,785 9,785 9,785 40% Shareholders funds 64,943 70,139 75,539 83,158 88,045 92,795 35% Total liabilities & equity 100,582 118,976 127,864 127,832 130,930 135,576 30% Net Debt 20,203 27,443 24,968 23,396 20,281 20,253 25% Margins and profitability 20% EBIT margin 10.7% 14.5% 14.5% 15.5% 13.9% 12.8% 15% EBITDA margin 16.4% 22.5% 21.8% 22.5% 21.1% 20.4% 10% Net margin 7.0% 8.3% 8.3% 10.5% 9.6% 8.9% 5% ROE 5.7% 7.1% 7.4% 9.1% 8.1% 7.4% 0% ROA 3.7% 4.2% 4.3% 5.9% 5.5% 5.1% 0.05 ROIC 5.2% 6.7% 7.4% 7.9% 7.2% 6.5% 0.10 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 21% 14% 11% 9% 3% 3% Revenue growth EPS growth EBITDA growth 10% 57% 7% 13% -4% -0% EPS growth 15% 34% 12% 37% -6% -4% Liquidity and solvency Valuation Cash ratio 0.0 0.5 0.3 0.2 0.2 0.1 Current ratio 0.8 1.7 1.0 1.3 1.3 1.2 14 Interest coverage (5.4) (3.6) (3.7) (6.4) (7.2) (7.9) 12 Debt/Equity 0.3 0.5 0.4 0.3 0.3 0.2 10 Debt/Total assets 0.2 0.3 0.2 0.2 0.2 0.2 Net debt / EBITDA 2.3 2.0 1.7 1.4 1.3 1.3 8 Valuation 6 P/E 11.5 8.5 7.6 5.6 5.9 6.2 4 P/CE 6.5 5.1 4.1 3.3 3.4 3.3 P/BV 0.7 0.6 0.6 0.5 0.5 0.5 2 EV/Sales 1.2 1.2 1.0 0.9 0.8 0.8 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 7.3 5.2 4.7 4.0 4.0 4.0 Dividend yield, (ords) 0.0% 0.0% 0.0% 5.4% 5.1% 6.5% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.10 0.14 0.16 0.21 0.20 0.19 DPS, ords 0.00 0.00 0.00 0.06 0.06 0.08 DPS, prefs ------BVPS 1.84 1.98 2.14 2.35 2.49 2.62
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 17
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-1: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 30% 24,000 Revenues 54,104 60,252 62,484 68,243 74,551 76,419 28% 22,000 Depreciation 3,384 4,820 5,409 5,962 6,386 6,815 26% 20,000 EBITDA 7,742 11,905 14,036 17,120 19,174 18,651 24% 18,000 Operating profit (EBIT) 8,384 7,017 9,859 11,158 12,788 11,835 22% 16,000 Net interest expense (122) (1,731) (1,741) (3,210) (3,474) (3,354) 20% 14,000 Non-op. revenue (expenses) 0 0 0 0 0 0 18% 12,000 Pretax profit 8,262 5,286 8,118 7,949 9,314 8,481 16% 10,000 Taxes (1,745) (1,384) (1,876) (1,590) (1,863) (1,696) 14% 8,000 Minority interest 0 0 0 0 0 0 12% 6,000 Net income 6,517 3,902 6,242 6,359 7,451 6,785 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 2,078 2,663 1,342 6,442 1,272 382 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 4,190 6,920 9,941 9,089 16,039 16,572 Capex (13,374) (17,345) (12,587) (10,600) (10,740) (10,045) 20,000 Disposals (Acquisitions) 814 339 460 0 0 0 15,000 Investing cashflow (12,559) (17,006) (12,128) (10,600) (10,740) (10,045) 10,000 Equity 0 0 0 0 0 0 Debt 8,245 10,362 2,728 6,600 0 (3,000) 5,000 Financing cashflow 8,076 10,182 2,531 2,921 (4,555) (7,844) 0 Net change in cash (302) 98 344 1,409 744 (1,317) (5,000) Balance sheet (10,000) Cash & equivalents 277 376 720 2,129 2,874 1,556 (15,000) Current assets 13,584 15,952 17,263 29,165 32,408 31,831 (20,000) PP&E 99,020 120,656 129,057 133,695 138,049 141,279 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,185 1,233 1,139 1,139 1,139 1,139 Operating cash flow Investing cash flow Total assets 114,021 137,942 147,936 164,450 172,047 174,700 Current liabilities 15,634 21,257 19,923 23,783 25,003 25,364 S-T Debt 6,906 11,399 10,586 10,586 10,586 10,586 L-T Debt 16,294 22,468 26,234 32,834 32,834 29,834 Momentum Other L-T liabilities 6,789 9,511 11,009 11,009 11,009 11,009 80% Shareholders funds 75,304 84,707 84,707 96,047 102,008 107,436 Total liabilities & equity 114,021 137,942 147,936 164,450 172,047 174,700 60% Net Debt 22,923 33,492 36,101 41,291 40,547 38,864 40% Margins and profitability 20% EBIT margin 15.5% 11.6% 15.8% 16.4% 17.2% 15.5% EBITDA margin 14.3% 19.8% 22.5% 25.1% 25.7% 24.4% 0% Net margin 12.0% 6.5% 10.0% 9.3% 10.0% 8.9% 0.2 ROE 8.7% 4.6% 7.4% 6.6% 7.3% 6.3% 0.4 ROA 5.7% 2.8% 4.2% 3.9% 4.3% 3.9% ROIC 6.8% 4.8% 6.2% 6.4% 7.1% 6.4% 0.6 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 31% 11% 4% 9% 9% 3% Revenue growth EPS growth EBITDA growth -0% 54% 18% 22% 12% -3% EPS growth 63% -40% 60% 2% 17% -9% Liquidity and solvency Valuation Cash ratio 0.0 0.0 0.0 0.1 0.1 0.1 Current ratio 0.9 0.8 0.9 1.2 1.3 1.3 7 Interest coverage (68.5) (4.1) (5.7) (3.5) (3.7) (3.5) 6 Debt/Equity 0.3 0.4 0.4 0.5 0.4 0.4 5 Debt/Total assets 0.2 0.2 0.2 0.3 0.3 0.2 Net debt / EBITDA 3.0 2.8 2.6 2.4 2.1 2.1 4 Valuation 3 P/E 4.1 6.9 4.3 4.2 3.6 3.9 2 P/CE 2.7 3.1 2.3 2.2 1.9 2.0 1 P/BV 0.4 0.3 0.3 0.3 0.3 0.2 EV/Sales 0.9 1.0 1.0 1.0 0.9 0.9 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 6.4 5.1 4.5 4.0 3.5 3.5 Dividend yield, (ords) 0.0% 0.0% 1.8% 4.0% 5.6% 5.1% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 0.00 0.00 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.02 0.02 0.02 0.02 0.03 0.03
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 18
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-2: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012E 2013E 2014E 2015E Income statement 25% 12,000 Revenues 31,609 30,391 31,994 34,942 36,621 46,543 20% 10,000 Depreciation 1,745 1,835 2,288 2,399 2,627 2,976 EBITDA 679 (30) 2,775 3,991 5,234 8,779 15% 8,000 Operating profit (EBIT) (1,330) (1,930) (2,253) 1,592 2,607 5,803 10% 6,000 Net interest expense (1,289) (1,808) (3,207) (1,405) (2,251) (3,351) 5% 4,000 Non-op. revenue (expenses) 0 0 0 0 0 0 0% 2,000 Pretax profit (2,619) (3,738) (5,481) 187 356 2,452 -5% 0 Taxes 212 150 968 (37) (71) (490) -10% (2,000) Minority interest (7) (37) 27 0 0 0 -15% (4,000) Net income (2,408) (3,588) (4,512) 149 285 1,962 2009 2010 2011 2012E 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 1,429 1,269 (4,822) 3,937 (976) 944 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow (1,015) (1,363) 4,836 16 6,139 7,345 Capex (2,754) (2,881) (2,782) (5,699) (8,727) (10,176) 8,000 Disposals (Acquisitions) (2,023) 2,591 2,657 0 0 0 6,000 Investing cashflow (4,777) (15) (126) (5,699) (8,727) (10,176) 4,000 Equity 0 0 0 0 0 0 2,000 Debt 8,065 1,438 (2,079) 8,000 5,000 6,000 0 Financing cashflow 6,609 (200) (4,602) 6,595 2,749 2,649 (2,000) Net change in cash 818 (1,579) 109 912 161 (182) (4,000) Balance sheet (6,000) (8,000) Cash & equivalents 1,678 99 208 1,120 1,281 1,099 (10,000) Current assets 15,772 14,408 11,692 15,978 16,601 19,755 (12,000) PP&E 28,118 33,296 29,000 32,300 38,400 45,600 2009 2010 2011 2012E 2013E 2014E 2015E Goodwill and other assets 36 371 6,067 6,067 6,067 6,067 Operating cash flow Investing cash flow Total assets 44,165 48,305 47,039 54,625 61,348 71,702 Current liabilities 11,802 18,073 22,373 21,809 23,248 25,640 S-T Debt 6,922 9,426 13,447 13,447 13,447 13,447 L-T Debt 12,038 10,975 4,949 12,949 17,949 23,949 Momentum Other L-T liabilities 1,822 3,435 3,130 3,130 3,130 3,130 90% Shareholders funds 18,502 15,822 16,588 16,737 17,022 18,984 80% Total liabilities & equity 44,165 48,305 47,039 54,625 61,348 71,702 70% Net Debt 17,282 20,301 18,188 25,276 30,115 36,297 60% Margins and profitability 50% EBIT margin (4.2%) (6.4%) (7.0%) 4.6% 7.1% 12.5% 40% EBITDA margin 2.1% (0.1%) 8.7% 11.4% 14.3% 18.9% 30% Net margin (7.6%) (11.8%) (14.1%) 0.4% 0.8% 4.2% 20% ROE (13.0%) (22.7%) (27.2%) 0.9% 1.7% 10.3% 10% ROA (5.5%) (7.4%) (9.6%) 0.3% 0.5% 2.7% 0% ROIC (3.5%) (5.1%) (7.4%) 4.0% 5.7% 10.3% 0.10 2009 2010 2011 2012E 2013E 2014E 2015E Momentum Revenue growth 22% -4% 5% 9% 5% 27% Revenue growth EPS growth EBITDA growth n/m n/m n/m 44% 31% 68% EPS growth n/m n/m n/m n/m 89% 590% Liquidity and solvency Valuation Cash ratio 0.1 0.0 0.0 0.1 0.1 0.0 Current ratio 1.3 0.8 0.5 0.7 0.7 0.8 100 Interest coverage 1.0 1.1 0.7 (1.1) (1.2) (1.7) 0 Debt/Equity 1.0 1.3 1.1 1.6 1.8 2.0 (100) Debt/Total assets 0.4 0.4 0.4 0.5 0.5 0.5 (200) Net debt / EBITDA 25.4 (687.0) 6.6 6.3 5.8 4.1 (300) Valuation (400) P/E nm nm nm 13.1 6.9 1.0 (500) P/CE nm nm nm 0.8 0.7 0.4 (600) P/BV 0.1 0.1 0.1 0.1 0.1 0.1 (700) EV/Sales 0.6 0.7 0.6 0.8 0.9 0.8 (800) 2009 2010 2011 2012E 2013E 2014E 2015E EV/EBITDA 28.3 (753.6) 7.3 6.8 6.1 4.4 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS (0.00) (0.00) (0.00) 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs 0.00 0.00 0.00 0.00 0.00 0.00 BVPS 0.01 0.01 0.01 0.01 0.01 0.01
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 19
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Mosenergo: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 17% 26,000 Revenues 145,298 161,119 157,139 172,468 185,423 202,201 Depreciation 12,214 13,041 13,716 14,597 16,241 17,040 16% 24,000 EBITDA 20,071 23,928 20,250 22,103 24,290 25,118 15% 22,000 Operating profit (EBIT) 7,878 10,887 6,534 7,505 8,049 8,078 14% 20,000 Net interest expense 2,259 1,079 1,480 439 (1,063) (1,341) 13% 18,000 Non-op. revenue (expenses) 0 0 0 0 0 0 Pretax profit 10,998 11,966 8,014 7,944 6,986 6,737 12% 16,000 Taxes (2,330) (2,074) (1,698) (1,589) (1,397) (1,347) 11% 14,000 Minority interest 0 0 0 0 0 0 10% 12,000 Net income 8,668 9,892 6,316 6,356 5,589 5,390 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (16,896) 5,917 9,100 (11,339) 1,151 1,491 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 22,445 16,562 12,743 31,853 21,742 22,280 Capex (6,663) (17,191) (22,013) (41,102) (19,975) (22,153) 40,000 Disposals (Acquisitions) 12,640 619 (4,483) 0 0 0 30,000 Investing cashflow 5,977 (16,572) (26,496) (41,102) (19,975) (22,153) 20,000 Equity 0 0 0 0 0 0 10,000 Debt 0 (1,976) 1,985 (2,000) 1,000 2,000 0 Financing cashflow (2,354) (2,762) 818 (2,832) (1,460) (688) (10,000) Net change in cash 26,068 (2,762) (12,935) (12,081) 308 (560) (20,000) Balance sheet (30,000) Cash & equivalents 28,334 25,572 12,632 556 864 304 (40,000) Current assets 58,554 62,618 55,584 45,030 48,679 52,445 (50,000) PP&E 180,559 185,295 190,387 216,891 220,624 225,737 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 16,588 14,508 20,981 20,981 20,981 20,981 Operating cash flow Investing cash flow Total assets 255,701 262,421 267,744 283,695 291,076 299,955 Current liabilities 24,048 25,136 18,189 31,050 33,240 36,076 S-T Debt 4,976 5,354 1,898 1,898 1,898 1,898 L-T Debt 11,770 10,223 16,616 14,616 15,616 17,616 Momentum Other L-T liabilities 26,114 27,029 27,303 27,303 27,303 27,303 30% Shareholders funds 193,769 200,033 205,636 210,725 214,917 218,960 Total liabilities & equity 255,701 262,421 267,744 283,695 291,076 299,955 20% Net Debt (11,588) (9,995) 5,882 15,958 16,650 19,210 10% Margins and profitability 0% EBIT margin 5.4% 6.8% 4.2% 4.4% 4.3% 4.0% EBITDA margin 13.8% 14.9% 12.9% 12.8% 13.1% 12.4% 0.10 Net margin 6.0% 6.1% 4.0% 3.7% 3.0% 2.7% 0.20 ROE 4.5% 4.9% 3.1% 3.0% 2.6% 2.5% 0.30 ROA 3.4% 3.8% 2.4% 2.2% 1.9% 1.8% ROIC 3.1% 4.1% 2.2% 2.4% 2.5% 2.5% 0.40 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 29% 11% -2% 10% 8% 9% Revenue growth EPS growth EBITDA growth 48% 19% -15% 9% 10% 3% EPS growth 423% 14% -36% 1% -12% -4% Liquidity and solvency Valuation Cash ratio 1.2 1.0 0.7 0.0 0.0 0.0 Current ratio 2.4 2.5 3.1 1.5 1.5 1.5 30 Interest coverage 3.5 10.1 4.4 17.1 (7.6) (6.0) 25 Debt/Equity 0.1 0.1 0.1 0.1 0.1 0.1 Debt/Total assets 0.1 0.1 0.1 0.1 0.1 0.1 20 Net debt / EBITDA (0.6) (0.4) 0.3 0.7 0.7 0.8 15 Valuation P/E 5.0 4.4 6.8 6.8 7.7 8.0 10 P/CE 2.1 1.9 2.1 2.1 2.0 1.9 5 P/BV 0.2 0.2 0.2 0.2 0.2 0.2 EV/Sales 0.2 0.2 0.3 0.3 0.3 0.3 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 1.6 1.4 2.4 2.7 2.5 2.5 Dividend yield, (ords) 1.8% 2.8% 2.2% 3.0% 3.2% 3.1% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.22 0.25 0.16 0.16 0.14 0.14 DPS, ords 0.02 0.03 0.02 0.03 0.04 0.03 DPS, prefs ------BVPS 4.87 5.03 5.17 5.30 5.41 5.51
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 20
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Quadra (TGK-4): Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012E 2013E 2014E 2015E Income statement 14% 8,000 Revenues 35,542 40,227 39,869 42,578 49,177 53,237 12% 7,000 Depreciation 3,286 2,827 2,994 3,340 3,780 4,100 10% 6,000 EBITDA 3,837 4,348 2,277 4,621 4,947 6,374 8% 5,000 Operating profit (EBIT) 3,288 1,313 (6,777) 1,281 1,167 2,273 6% 4,000 Net interest expense (134) (93) (362) (1,605) (2,082) (2,715) 4% 3,000 Non-op. revenue (expenses) 0 0 (5,795) 338 391 423 2% 2,000 Pretax profit 3,184 1,187 (7,139) (324) (915) (442) 0% 1,000 Taxes (389) (388) 1,249 0 0 0 -2% 0 -4% (1,000) Minority interest 0 0 0 0 0 0 -6% (2,000) Net income 2,430 879 (5,889) (324) (915) (442) 2009 2010 2011 2012E 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,457) 3,059 2,038 (489) 1,189 310 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 4,728 693 303 5,110 3,759 6,064 Capex (6,948) (11,114) (8,674) (11,000) (8,000) (4,305) 8,000 Disposals (Acquisitions) 2,294 5,007 (375) 0 0 0 6,000 Investing cashflow (4,654) (6,106) (9,049) (11,000) (8,000) (4,305) 4,000 Equity 0 1 0 0 0 0 2,000 Debt 743 2,173 8,642 12,000 4,000 1,200 0 Financing cashflow 586 2,113 8,593 10,395 1,918 (1,515) (2,000) Net change in cash 660 (3,301) (152) 4,506 (2,324) 244 (4,000) Balance sheet (6,000) (8,000) Cash & equivalents 3,713 413 261 4,767 2,443 2,687 (10,000) Current assets 10,316 8,735 9,861 13,592 12,881 14,016 (12,000) PP&E 26,955 29,710 38,041 45,700 49,920 50,125 2009 2010 2011 2012E 2013E 2014E 2015E Goodwill and other assets 759 1,588 3,092 3,092 3,092 3,092 Operating cash flow Investing cash flow Total assets 38,082 39,819 50,994 62,384 65,893 67,233 Current liabilities 6,059 6,600 9,559 9,273 9,698 10,279 S-T Debt 2,058 3,501 5,264 5,264 5,264 5,264 L-T Debt 627 1,403 8,327 20,327 24,327 25,527 Momentum Other L-T liabilities 1,314 1,532 2,224 2,224 2,224 2,224 20% Shareholders funds 30,081 30,296 30,884 30,560 29,645 29,203 10% Total liabilities & equity 38,082 39,819 50,994 62,384 65,893 67,233 0% Net Debt (1,028) 4,492 13,329 20,824 27,148 28,104 0.10 Margins and profitability 0.20 EBIT margin 9.3% 3.3% (17.0%) 3.0% 2.4% 4.3% 0.30 EBITDA margin 10.8% 10.8% 5.7% 10.9% 10.1% 12.0% 0.40 Net margin 6.8% 2.2% (14.8%) (0.8%) (1.9%) (0.8%) 0.50 ROE 8.1% 2.9% (19.1%) (1.1%) (3.1%) (1.5%) ROA 6.4% 2.2% (11.5%) (0.5%) (1.4%) (0.7%) 0.60 ROIC 9.3% 3.2% (13.2%) 2.1% 1.7% 3.4% 0.70 2009 2010 2011 2012E 2013E 2014E 2015E Momentum Revenue growth 12% 13% -1% 7% 15% 8% Revenue growth EPS growth EBITDA growth n/m 13% -48% 103% 7% 29% EPS growth n/m -64% n/m n/m n/m n/m Liquidity and solvency Valuation Cash ratio 0.6 0.1 0.0 0.5 0.3 0.3 Current ratio 1.7 1.3 1.0 1.5 1.3 1.4 10 Interest coverage (24.6) (14.1) 18.7 (0.8) (0.6) (0.8) 8 Debt/Equity 0.1 0.2 0.4 0.8 1.0 1.1 6 Debt/Total assets 0.1 0.1 0.3 0.4 0.4 0.5 Net debt / EBITDA (0.3) 1.0 5.9 4.5 5.5 4.4 4 Valuation 2 P/E 2.5 6.9 nm nm nm nm 0 P/CE 1.1 1.6 nm 2.0 2.1 1.7 P/BV 0.2 0.2 0.2 0.2 0.2 0.2 (2) EV/Sales 0.1 0.3 0.5 0.6 0.7 0.6 (4) 2009 2010 2011 2012E 2013E 2014E 2015E EV/EBITDA 1.3 2.4 8.5 5.8 6.7 5.4 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 0.00 (0.00) (0.00) (0.00) (0.00) DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs 0.00 0.00 0.00 0.00 0.00 0.00 BVPS 0.02 0.02 0.02 0.02 0.02 0.02
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 21
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-5: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012E 2013E 2014E 2015E Income statement 30% 6,000 Revenues 22,551 27,638 26,148 27,735 31,607 38,268 Depreciation 687 1,215 1,318 1,577 1,817 1,997 25% 5,000 EBITDA 3,316 2,299 236 218 1,419 5,431 20% 4,000 Operating profit (EBIT) 1,144 1,083 (1,082) (1,358) (398) 3,434 Net interest expense 380 (56) (478) (1,821) (2,453) (3,780) 15% 3,000 Non-op. revenue (expenses) 0 285 188 237 212 225 10% 2,000 Pretax profit 1,130 1,027 (1,560) (3,180) (2,850) (346) Taxes (337) (301) (32) 0 0 0 5% 1,000 Minority interest 0 14 2 2 2 2 0% 0 Net income 793 726 (1,592) (3,180) (2,850) (346) 2009 2010 2011 2012E 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (232) 4,405 1,187 (876) 620 2,009 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 2,634 (3,602) (3,067) 1,331 1,011 3,646 Capex (3,600) (3,339) (6,466) (6,000) (4,500) (2,995) 4,000 Disposals (Acquisitions) 0 2,309 401 0 0 0 3,000 Investing cashflow (1,540) (1,030) (6,065) (6,000) (4,500) (2,995) 2,000 Equity 0 0 0 0 0 0 1,000 Debt 5,000 0 0 7,000 6,000 3,000 0 (1,000) Financing cashflow 5,035 3,296 3,380 5,179 3,547 (780) (2,000) Net change in cash 6,129 (1,336) (5,752) 509 59 (129) (3,000) Balance sheet (4,000) Cash & equivalents 8,025 6,861 1,109 1,619 1,677 1,548 (5,000) (6,000) Current assets 23,854 16,198 15,863 15,639 16,901 20,187 (7,000) PP&E 7,525 24,290 28,368 32,792 35,475 36,474 2009 2010 2011 2012E 2013E 2014E 2015E Goodwill and other assets 10,885 10,148 9,974 9,974 9,974 9,974 Operating cash flow Investing cash flow Total assets 42,264 51,315 54,939 59,139 63,084 67,369 Current liabilities 6,562 11,559 18,702 18,845 19,428 20,834 S-T Debt 2,039 6,921 13,654 13,654 13,654 13,654 L-T Debt 11,127 9,562 6,243 13,243 19,243 22,243 Momentum Other L-T liabilities 747 3,027 4,446 4,446 4,446 4,446 30% Shareholders funds 23,828 27,168 25,549 22,369 19,519 19,173 20% Total liabilities & equity 42,264 51,315 54,939 59,139 63,084 67,370 10% Net Debt 5,141 9,621 18,788 25,279 31,220 34,349 0% Margins and profitability 0.10 EBIT margin 5.1% 3.9% (4.1%) (4.9%) (1.3%) 9.0% 0.20 EBITDA margin 14.7% 8.3% 0.9% 0.8% 4.5% 14.2% 0.30 Net margin 3.5% 2.6% (6.1%) (11.5%) (9.0%) (0.9%) 0.40 ROE 3.3% 2.7% (6.2%) (14.2%) (14.6%) (1.8%) ROA 1.9% 1.4% (2.9%) (5.4%) (4.5%) (0.5%) 0.50 ROIC 3.3% 2.6% (2.5%) (2.8%) (0.8%) 6.1% 0.60 2009 2010 2011 2012E 2013E 2014E 2015E Momentum Revenue growth 29% 23% -5% 6% 14% 21% Revenue growth EPS growth EBITDA growth -17% -31% -90% -8% 550% 283% EPS growth -52% -9% n/m n/m n/m n/m Liquidity and solvency Valuation Cash ratio 1.2 0.6 0.1 0.1 0.1 0.1 Current ratio 3.6 1.4 0.8 0.8 0.9 1.0 140 Interest coverage 3.0 (19.3) 2.3 0.7 0.2 (0.9) 120 Debt/Equity 0.6 0.6 0.8 1.2 1.7 1.9 100 Debt/Total assets 0.3 0.3 0.4 0.5 0.5 0.5 Net debt / EBITDA 1.6 4.2 79.5 115.7 22.0 6.3 80 Valuation 60 P/E 4.4 4.8 nm nm nm nm 40 P/CE 2.3 1.8 nm nm nm 2.1 20 P/BV 0.1 0.1 0.1 0.2 0.2 0.2 EV/Sales 0.4 0.5 0.9 1.0 1.1 1.0 0 2009 2010 2011 2012E 2013E 2014E 2015E EV/EBITDA 2.6 5.7 94.1 131.6 24.4 7.0 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 0.00 (0.00) (0.00) (0.00) (0.00) DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.02 0.02 0.02 0.02 0.02 0.02
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 22
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-6: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 16% 7,500 Revenues 30,425 28,687 27,794 30,953 36,083 41,844 Depreciation 1,020 1,653 1,539 1,820 2,000 2,120 14% 6,500 EBITDA 960 937 1,165 3,313 3,880 5,803 12% 5,500 Operating profit (EBIT) (234) (716) (374) 1,493 1,880 3,683 10% 4,500 Net interest expense 883 461 91 (1,222) (1,488) (1,858) 8% 3,500 Non-op. revenue (expenses) (201) (475) (566) (835) (974) (1,129) Pretax profit (1,111) (256) (283) 271 392 1,826 6% 2,500 Taxes 137 (214) (96) (54) (78) (365) 4% 1,500 Minority interest 0 0 0 0 0 0 2% 500 Net income (974) (470) (378) 217 313 1,460 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (2,413) 2,335 1,730 (1,955) 922 259 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 831 (1,520) (1,559) 4,379 1,906 4,050 Capex (2,600) (1,612) (7,029) (4,500) (3,000) (2,014) 6,000 Disposals (Acquisitions) 0 (1,662) 828 1,057 1,023 1,189 Investing cashflow 115 (3,274) (6,201) (3,443) (1,977) (825) 4,000 Equity 0 0 0 0 0 0 2,000 Debt 5,000 0 0 1,000 1,000 (1,000) 0 Financing cashflow 9,236 0 0 (222) (488) (2,858) (2,000) Net change in cash 10,182 (4,794) (7,761) 714 (559) 367 Balance sheet (4,000) Cash & equivalents 13,238 9,344 1,793 2,298 1,738 2,105 (6,000) Current assets 27,340 19,354 14,125 11,437 12,255 13,462 (8,000) PP&E 14,066 17,878 23,307 25,987 26,988 26,882 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 3,933 12,110 13,516 13,516 13,516 13,516 Operating cash flow Investing cash flow Total assets 45,338 50,101 51,646 51,638 53,456 54,557 Current liabilities 8,824 9,458 16,173 14,936 15,394 15,979 S-T Debt 6,085 7,023 12,156 12,156 12,156 12,156 L-T Debt 7,060 8,629 3,671 4,671 5,671 4,671 Momentum Other L-T liabilities 442 1,635 1,802 1,802 1,802 1,802 50% Shareholders funds 29,012 30,379 30,001 30,218 30,531 31,991 Total liabilities & equity 45,338 50,101 51,646 51,638 53,455 54,557 40% Net Debt (93) 6,308 14,034 14,530 16,089 14,722 30% Margins and profitability EBIT margin (0.8%) (2.5%) (1.3%) 4.8% 5.2% 8.8% 20% EBITDA margin 3.2% 3.3% 4.2% 10.7% 10.8% 13.9% 10% Net margin (3.2%) (1.6%) (1.4%) 0.7% 0.9% 3.5% ROE (3.4%) (1.5%) (1.3%) 0.7% 1.0% 4.6% 0% ROA (2.1%) (0.9%) (0.7%) 0.4% 0.6% 2.7% ROIC (0.8%) (1.8%) (0.9%) 3.5% 4.1% 8.1% 0.10 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 40% -6% -3% 11% 17% 16% Revenue growth EPS growth EBITDA growth -67% -2% 24% 184% 17% 50% EPS growth n/m n/m n/m n/m 44% 364% Liquidity and solvency Valuation Cash ratio 1.5 1.0 0.1 0.2 0.1 0.1 Current ratio 3.1 2.0 0.9 0.8 0.8 0.8 30 Interest coverage (0.3) (1.6) (4.1) (1.2) (1.3) (2.0) 25 Debt/Equity 0.5 0.5 0.5 0.6 0.6 0.5 Debt/Total assets 0.3 0.3 0.3 0.3 0.3 0.3 20 Net debt / EBITDA (0.1) 6.7 12.0 4.4 4.1 2.5 15 Valuation P/E nm nm nm 26.1 18.0 3.9 10 P/CE 122.0 4.8 4.9 2.8 2.5 1.6 5 P/BV 0.2 0.2 0.2 0.2 0.2 0.2 EV/Sales 0.2 0.4 0.7 0.7 0.6 0.5 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 5.8 12.8 16.9 6.1 5.6 3.5 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS (0.00) (0.00) (0.00) 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.02 0.02 0.02 0.02 0.02 0.02
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 23
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
VTGK (TGK-7): Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 20% 19,000 Revenues 58,587 66,937 63,274 66,071 70,517 73,800 18% 17,000 Depreciation 3,236 3,310 3,461 3,602 3,818 3,986 EBITDA 8,128 3,012 5,657 10,235 10,560 11,411 16% 15,000 Operating profit (EBIT) 4,893 (298) 2,195 6,633 6,742 7,425 14% 13,000 Net interest expense 927 551 (470) (2,033) (1,215) (988) 12% 11,000 Non-op. revenue (expenses) 500 189 262 173 185 194 10% 9,000 Pretax profit 5,820 253 1,725 4,600 5,527 6,437 8% 7,000 Taxes (1,065) (484) (681) (920) (1,105) (1,287) 6% 5,000 Minority interest 0 0 0 0 0 0 4% 3,000 Net income 4,755 (230) 1,043 3,680 4,422 5,149 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 2,479 1,237 10,400 (5,300) 2,174 1,927 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 5,346 1,292 (5,425) 14,615 7,281 8,197 Capex (6,423) (6,179) (3,526) (5,400) (4,200) (4,385) 15,000 Disposals (Acquisitions) 1,577 335 (733) 0 0 0 Investing cashflow (7,717) (5,844) (4,260) (5,400) (4,200) (4,385) 10,000 Equity 0 0 1 0 0 0 Debt 5,000 1,881 (4,034) (3,000) (2,000) (3,000) 5,000 Financing cashflow 851 2,576 7,537 (7,033) (3,215) (5,503) Net change in cash (1,520) (1,976) (2,147) 2,182 (134) (1,691) 0 Balance sheet (5,000) Cash & equivalents 5,008 3,033 886 3,068 2,934 1,242 Current assets 20,851 24,109 27,801 23,248 26,135 26,605 (10,000) PP&E 46,453 48,181 48,976 50,773 51,155 51,554 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 2,435 302 7,187 7,187 7,187 7,187 Operating cash flow Investing cash flow Total assets 70,673 74,384 85,744 82,990 86,258 87,127 Current liabilities 12,542 12,965 25,500 22,065 22,912 22,146 S-T Debt 4,803 6,611 16,244 14,244 14,244 13,244 L-T Debt 1 3,590 1,435 (1,565) (3,565) (6,565) Momentum Other L-T liabilities 5,160 5,119 5,096 5,096 5,096 5,096 25% Shareholders funds 52,970 52,709 53,707 57,387 61,809 66,443 20% Total liabilities & equity 70,673 74,384 85,739 82,990 86,259 87,127 Net Debt (205) 7,168 16,794 9,611 7,746 5,437 15% Margins and profitability 10% EBIT margin 8.4% (0.4%) 3.5% 10.0% 9.6% 10.1% EBITDA margin 13.9% 4.5% 8.9% 15.5% 15.0% 15.5% 5% Net margin 8.1% (0.3%) 1.6% 5.6% 6.3% 7.0% 0% ROE 9.0% (0.4%) 1.9% 6.4% 7.2% 7.7% 0.05 ROA 6.7% (0.3%) 1.2% 4.4% 5.1% 5.9% ROIC 7.4% (0.4%) 3.0% 9.2% 8.9% 9.3% 0.10 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 15% 14% -5% 4% 7% 5% Revenue growth EPS growth EBITDA growth -6% -63% 88% 81% 3% 8% EPS growth 6% n/m n/m 253% 20% 16% Liquidity and solvency Valuation Cash ratio 0.4 0.2 0.0 0.1 0.1 0.1 Current ratio 1.7 1.9 1.1 1.1 1.1 1.2 50 Interest coverage 5.3 (0.5) (4.7) (3.3) (5.6) (7.5) 45 Debt/Equity 0.1 0.2 0.3 0.2 0.2 0.1 40 35 Debt/Total assets 0.1 0.1 0.2 0.2 0.1 0.1 30 Net debt / EBITDA (0.0) 2.4 3.0 0.9 0.7 0.5 25 Valuation 20 P/E 10.8 nm 49.0 13.9 11.6 9.9 15 P/CE 6.4 16.6 11.4 7.0 6.2 5.6 10 P/BV 1.0 1.0 1.0 0.9 0.8 0.8 5 EV/Sales 0.9 0.9 1.1 0.9 0.8 0.8 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 6.3 19.4 12.0 5.9 5.6 5.0 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.16 (0.01) 0.03 0.12 0.15 0.17 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.02 DPS, prefs ------BVPS 1.76 1.76 1.79 1.91 2.06 2.21
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 24
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-9: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 25% 22,000 Revenues 46,754 148,441 142,418 150,390 152,869 163,207 Depreciation 1,512 3,418 3,455 3,738 4,098 4,436 20% 18,000 EBITDA 4,276 (1,126) 4,328 3,515 4,819 10,172 15% 14,000 Operating profit (EBIT) 2,677 (4,544) 873 (223) 721 5,736 Net interest expense 121 (888) (2,534) (2,933) (4,640) (4,713) 10% 10,000 Non-op. revenue (expenses) (468) 1,152 578 865 721 793 5% 6,000 Pretax profit 905 (5,165) (1,515) (2,949) (3,742) 1,214 Taxes 429 (158) 343 0 0 243 0% 2,000 Minority interest 0 12 (7) (11) (14) 4 -5% (2,000) Net income 476 (5,006) (1,857) (2,949) (3,742) 971 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 335 24 (2,407) 7,357 (3,906) 361 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 0 3,040 4,858 (3,184) 9,269 10,170 Capex (4,979) (6,146) (7,073) (9,000) (8,470) (10,000) 1,400,000 Disposals (Acquisitions) 0 1,644 379 (451) (368) (410) 1,200,000 Investing cashflow 0 (4,503) (6,694) (9,451) (8,838) (10,410) 1,000,000 Equity 0 0 0 0 0 0 800,000 Debt 0 2,159 781 7,500 5,000 5,000 600,000 Financing cashflow 5,224 559 780 4,567 360 287 400,000 Net change in cash 6,134 (904) (1,055) (8,068) 792 46 200,000 Balance sheet 0 (200,000) Cash & equivalents 9,432 10,390 9,335 1,266 2,058 2,104 (400,000) Current assets 35,640 38,380 39,788 39,490 35,141 38,786 (600,000) PP&E 16,578 50,090 57,602 62,865 67,237 72,801 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 19,664 1,252 1,339 1,339 1,339 1,339 Operating cash flow Investing cash flow Total assets 71,882 92,661 101,194 106,159 106,182 115,391 Current liabilities 11,984 38,612 54,548 54,962 53,727 56,965 S-T Debt 2,339 18,702 28,852 28,852 28,852 28,852 L-T Debt 17,967 13,782 3,367 10,867 15,867 20,867 Momentum Other L-T liabilities 1,498 5,303 10,546 10,546 10,546 10,546 20% Shareholders funds 40,432 34,965 32,733 29,784 26,042 27,014 Total liabilities & equity 71,882 92,661 101,195 106,159 106,182 115,391 0% Net Debt 10,875 22,094 22,885 38,453 42,661 47,615 0.2 Margins and profitability EBIT margin 5.7% (3.1%) 0.6% (0.1%) 0.5% 3.5% 0.4 EBITDA margin 9.1% (0.8%) 3.0% 2.3% 3.2% 6.2% 0.6 Net margin 1.0% (3.4%) (1.3%) (2.0%) (2.4%) 0.6% ROE 1.2% (14.3%) (5.7%) (9.9%) (14.4%) 3.6% 0.8 ROA 0.7% (5.4%) (1.8%) (2.8%) (3.5%) 0.8% ROIC 4.2% (8.3%) 1.9% (0.4%) 1.1% 8.1% 1.0 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 15% 217% -4% 6% 2% 7% Revenue growth EPS growth EBITDA growth -44% n/m n/m -19% 37% 111% EPS growth -89% n/m n/m n/m n/m n/m Liquidity and solvency Valuation Cash ratio 0.8 0.3 0.2 0.0 0.0 0.0 Current ratio 3.0 1.0 0.7 0.7 0.7 0.7 50 Interest coverage 22.1 5.1 (0.3) 0.1 (0.2) (1.2) 40 Debt/Equity 0.5 0.9 1.0 1.3 1.7 1.8 30 20 Debt/Total assets 0.3 0.4 0.3 0.4 0.4 0.4 10 Net debt / EBITDA 2.5 (19.6) 5.3 10.9 8.9 4.7 0 Valuation (10) P/E 48.4 nm nm nm nm 23.8 (20) P/CE 11.6 nm 14.5 29.2 65.6 4.3 (30) P/BV 0.6 0.7 0.7 0.8 0.9 0.9 (40) EV/Sales 0.7 0.3 0.3 0.4 0.4 0.4 (50) 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 8.0 (40.1) 10.6 17.5 13.7 7.0 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 (0.00) (0.00) (0.00) (0.00) 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.01 0.00 0.00 0.00 0.00 0.00
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 25
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
TGK-14: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012E 2013E 2014E 2015E Income statement 25% 3,000 Revenues 8,083 9,262 9,218 10,321 11,064 11,837 20% 2,500 Depreciation 337 390 397 478 513 551 EBITDA 349 926 1,388 1,663 2,183 2,525 15% 2,000 Operating profit (EBIT) 12 535 992 1,185 1,670 1,975 10% 1,500 Net interest expense 120 (102) (243) (466) (546) (561) 5% 1,000 Non-op. revenue (expenses) (184) (629) (629) (629) (629) (629) 0% 500 Pretax profit 132 (196) 121 90 495 785 -5% 0 Taxes (95) (21) (24) (18) (99) (157) -10% (500) Minority interest 0 0 0 0 0 0 -15% (1,000) Net income 37 (216) 96 72 396 628 2009 2010 2011 2012E 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 2,328 1,287 (122) 83 82 116 Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow (2,074) (1,011) 858 934 1,374 1,624 Capex (1,337) (151) (2,046) (871) (934) (1,002) 2,000 Disposals (Acquisitions) 0 0 0 0 0 0 1,500 Investing cashflow (1,337) (151) (2,046) (871) (934) (1,002) 1,000 Equity 0 0 0 0 0 0 500 Debt 0 0 2,000 1,000 0 (500) 0 Financing cashflow 120 898 1,757 534 (586) (1,123) (500) Net change in cash (3,291) (265) 569 597 (146) (502) (1,000) Balance sheet (1,500) Cash & equivalents 359 94 664 1,261 1,115 613 (2,000) Current assets 2,438 2,544 2,874 3,761 3,858 3,579 (2,500) PP&E 3,455 6,685 8,335 8,727 9,148 9,599 2009 2010 2011 2012E 2013E 2014E 2015E Goodwill and other assets 4,045 1,793 1,793 1,793 1,793 1,793 Operating cash flow Investing cash flow Total assets 9,997 11,022 13,002 14,281 14,799 14,971 Current liabilities 2,049 3,382 3,264 3,471 3,632 3,740 S-T Debt 800 1,800 1,800 1,800 1,800 1,800 L-T Debt 0 0 2,000 3,000 3,000 2,500 Momentum Other L-T liabilities 55 59 59 59 59 59 60% Shareholders funds 7,892 7,581 7,678 7,750 8,107 8,672 50% Total liabilities & equity 9,997 11,022 13,002 14,281 14,799 14,971 40% Net Debt 442 1,706 3,137 3,539 3,685 3,687 30% Margins and profitability 20% EBIT margin 0.1% 5.8% 10.8% 11.5% 15.1% 16.7% 10% EBITDA margin 4.3% 10.0% 15.1% 16.1% 19.7% 21.3% 0% Net margin 0.5% (2.3%) 1.0% 0.7% 3.6% 5.3% 0.10 ROE 0.5% (2.9%) 1.3% 0.9% 4.9% 7.2% ROA 0.4% (2.0%) 0.7% 0.5% 2.7% 4.2% 0.20 ROIC 0.1% 5.7% 8.7% 9.9% 13.3% 14.9% 0.30 2009 2010 2011 2012E 2013E 2014E 2015E Momentum Revenue growth 22% 15% -0% 12% 7% 7% Revenue growth EPS growth EBITDA growth n/m 165% 50% 20% 31% 16% EPS growth n/m n/m n/m -25% 451% 59% Liquidity and solvency Valuation Cash ratio 0.2 0.0 0.2 0.4 0.3 0.2 Current ratio 1.2 0.8 0.9 1.1 1.1 1.0 35 Interest coverage 0.1 (5.2) (4.1) (2.5) (3.1) (3.5) 30 Debt/Equity 0.1 0.2 0.5 0.6 0.6 0.5 25 Debt/Total assets 0.1 0.2 0.3 0.3 0.3 0.3 20 Net debt / EBITDA 1.3 1.8 2.3 2.1 1.7 1.5 15 Valuation 10 P/E nm nm 22.9 30.7 5.6 3.5 P/CE 5.9 12.7 4.5 4.0 2.4 1.9 5 P/BV 0.3 0.3 0.3 0.3 0.3 0.3 0 EV/Sales 0.3 0.4 0.6 0.6 0.5 0.5 (5) 2009 2010 2011 2012E 2013E 2014E 2015E EV/EBITDA 7.6 4.2 3.8 3.5 2.7 2.3 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 1.8% 2.8% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 (0.00) 0.00 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.01 0.01 0.01 0.01 0.01 0.01
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 26
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
FGC: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 70% 100,000 Revenues 113,330 139,571 140,313 152,183 158,692 165,427 Depreciation 30,185 33,187 43,908 48,275 52,275 55,714 65% 90,000 EBITDA 67,717 83,760 82,133 88,397 92,218 95,899 60% 80,000 Operating profit (EBIT) 22,805 71,837 33,279 40,121 39,942 40,185 55% 70,000 Net interest expense 5,188 3,679 3,899 (10,044) (11,475) (12,938) 50% 60,000 Non-op. revenue (expenses) (3,858) (12,653) (28,379) 0 0 0 Pretax profit 24,135 62,863 8,799 30,077 28,467 27,248 45% 50,000 Taxes 5,752 13,875 1,756 6,015 5,693 5,450 40% 40,000 Minority interest (626) (1,668) (240) (819) (776) (742) 35% 30,000 Net income 18,383 48,988 7,043 24,062 22,774 21,798 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 106,816 (90,033) 3,249 1,412 (4,412) (11,837) Provisions and write-offs 0 0 0 0 0 0 Other 49 (2,684) (37) 0 0 0 Cash flows, RUBmn Operating cashflow 53,449 68,645 70,306 80,970 90,937 102,287 Capex (140,939) (153,471) (150,431) (131,017) (120,000) (103,150) Disposals (Acquisitions) 0 0 0 0 0 0 Investing cashflow (127,043) (124,743) (145,711) (93,466) (108,525) (81,015) 100,000 Equity 11,193 2,220 3,247 0 0 0 50,000 Debt 50,000 80,105 82,500 13,582 50,000 15,000 Financing cashflow 53,468 68,152 73,834 (6,507) 24,644 (13,152) 0 Net change in cash (20,126) 12,054 (1,571) (19,003) 7,055 8,119 (50,000) Balance sheet Cash & equivalents 13,573 25,627 24,056 5,053 12,109 20,228 (100,000) Current assets 190,799 89,171 96,412 60,493 79,106 80,443 (150,000) PP&E 851,228 980,677 1,096,535 1,179,277 1,247,001 1,294,438 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 29,621 93,829 67,294 63,167 53,970 53,970 Operating cash flow Investing cash flow Total assets 1,071,648 1,163,677 1,260,241 1,302,937 1,380,077 1,428,850 Current liabilities 59,569 49,534 73,466 166,504 197,451 218,955 S-T Debt 7,385 2,002 23,218 111,203 135,378 142,630 L-T Debt 50,000 130,778 193,200 118,797 144,622 152,370 Momentum Other L-T liabilities 0 0 0 0 0 0 40% Shareholders funds 873,160 897,314 907,063 931,944 953,087 973,350 Total liabilities & equity 1,071,648 1,163,677 1,260,241 1,302,937 1,380,077 1,428,850 20% Net Debt 43,812 107,153 192,362 224,947 267,891 274,772 0% Margins and profitability 0.2 EBIT margin 20.1% 51.5% 23.7% 26.4% 25.2% 24.3% EBITDA margin 59.8% 60.0% 58.5% 58.1% 58.1% 58.0% 0.4 Net margin 16.2% 35.1% 5.0% 15.8% 14.4% 13.2% 0.6 ROE 2.1% 5.5% 0.8% 2.6% 2.4% 2.2% 0.8 ROA 1.7% 4.2% 0.6% 1.8% 1.7% 1.5% ROIC 1.8% 5.3% 2.3% 2.8% 2.7% 2.7% 1.0 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 29% 23% 1% 8% 4% 4% Revenue growth EPS growth EBITDA growth 80% 24% -2% 8% 4% 4% EPS growth n/m 161% -86% 242% -5% -4% Liquidity and solvency Valuation Cash ratio 0.2 0.5 0.3 0.0 0.1 0.1 Current ratio 3.2 1.8 1.3 0.4 0.4 0.4 20 Interest coverage 4.4 19.5 8.5 (4.0) (3.5) (3.1) 18 Debt/Equity 0.1 0.1 0.2 0.2 0.3 0.3 16 14 Debt/Total assets 0.1 0.1 0.2 0.2 0.2 0.2 12 Net debt / EBITDA 0.6 1.3 2.3 2.5 2.9 2.9 10 Valuation 8 P/E 7.0 2.7 18.7 5.5 5.8 6.1 6 P/CE 2.7 1.6 2.6 1.8 1.8 1.7 4 P/BV 0.1 0.1 0.1 0.1 0.1 0.1 2 EV/Sales 1.6 1.7 2.3 2.3 2.5 2.5 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 2.6 2.9 3.9 4.0 4.3 4.2 Dividend yield, (ords) 1.4% 3.7% 0.0% 1.8% 1.7% 1.7% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.01 0.04 0.01 0.02 0.02 0.02 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.71 0.71 0.72 0.74 0.76 0.77
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 27
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Russian Grid: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 28% 320,000 Revenues 559,496 634,608 621,633 801,056 838,867 895,051 Depreciation 46,025 54,075 61,499 113,745 121,862 129,174 26% 280,000 EBITDA 100,244 116,507 117,238 186,251 197,341 225,685 24% 240,000 Operating profit (EBIT) 54,219 59,254 49,688 72,505 75,480 96,511 Net interest expense (8,037) (5,843) (5,641) (18,028) (33,525) (38,576) 22% 200,000 Non-op. revenue (expenses) 0 0 0 0 0 0 20% 160,000 Pretax profit 46,537 53,655 44,117 54,478 41,955 57,936 Taxes 12,400 14,689 12,463 10,896 8,391 11,587 18% 120,000 Minority interest 11,969 13,662 11,099 15,281 11,768 16,251 16% 80,000 Net income 34,137 38,966 31,654 43,582 33,564 46,349 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (19,393) 3,725 20,821 (46,089) (5,196) (2,295) Provisions and write-offs 0 0 0 0 0 0 Other (604) 545 274 0 0 0 Cash flows, RUBmn Operating cashflow 76,424 89,338 88,823 267,108 148,741 155,459 Capex (75,681) (124,836) (131,029) (270,008) (264,068) (238,743) Disposals (Acquisitions) 0 0 0 0 0 0 Investing cashflow (83,215) (121,818) (152,952) (253,835) (252,593) (225,805) 200,000 Equity 0 0 0 0 0 0 100,000 Debt 10,983 52,722 36,041 (65,279) 120,000 72,370 Financing cashflow 2,465 56,443 50,967 (45,028) 119,564 71,699 0 Net change in cash (4,326) 23,963 (13,162) (31,755) 15,712 1,352 (100,000) Balance sheet Cash & equivalents 24,890 48,853 35,691 3,936 19,648 21,000 (200,000) Current assets 131,855 156,686 180,887 182,440 204,633 215,196 (300,000) PP&E 603,241 687,489 760,857 2,013,654 2,155,860 2,265,429 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 31,658 33,622 30,888 90,824 90,824 90,824 Operating cash flow Investing cash flow Total assets 767,806 879,077 972,736 2,290,253 2,454,653 2,574,784 Current liabilities 197,192 194,150 223,836 441,106 497,373 473,269 S-T Debt 27,139 26,954 40,098 177,971 222,560 186,950 L-T Debt 120,649 168,831 188,763 202,029 277,440 385,419 Momentum Other L-T liabilities 0 0 0 0 0 0 60% Shareholders funds 234,596 266,742 309,929 1,133,182 1,152,985 1,180,855 Total liabilities & equity 767,806 879,078 972,736 2,290,253 2,454,653 2,583,784 40% Net Debt 122,897 146,932 193,170 376,064 480,352 551,370 20% Margins and profitability 0% EBIT margin 9.7% 9.3% 8.0% 9.1% 9.0% 10.8% EBITDA margin 17.9% 18.4% 18.9% 23.3% 23.5% 25.2% 0.2 Net margin 6.1% 6.1% 5.1% 5.4% 4.0% 5.2% 0.4 ROE 14.6% 14.6% 10.2% 3.8% 2.9% 3.9% 0.6 ROA 4.4% 4.4% 3.3% 1.9% 1.4% 1.8% ROIC 7.9% 7.5% 5.6% 3.1% 3.1% 3.7% 0.8 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 21% 13% -2% 29% 5% 7% Revenue growth EPS growth EBITDA growth 16% 16% 1% 59% 6% 14% EPS growth 57% 14% -79% 38% -23% 38% Liquidity and solvency Valuation Cash ratio 0.1 0.3 0.2 0.0 0.0 0.0 Current ratio 0.7 0.8 0.8 0.4 0.4 0.5 6 Interest coverage (6.7) (10.1) (8.8) (4.0) (2.3) (2.5) 5 Debt/Equity 0.6 0.7 0.7 0.3 0.4 0.5 Debt/Total assets 0.2 0.2 0.2 0.2 0.2 0.2 4 Net debt / EBITDA 1.2 1.3 1.6 2.0 2.4 2.4 3 Valuation P/E 1.3 1.1 5.3 3.8 5.0 3.6 2 P/CE 0.5 0.5 1.8 1.1 1.1 0.9 1 P/BV 0.2 0.2 0.5 0.1 0.1 0.1 EV/Sales 0.3 0.3 0.4 0.5 0.6 0.7 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 1.8 1.8 2.2 2.3 2.7 2.7 Dividend yield, (ords) 1.4% 0.3% 0.0% 0.3% 0.4% 0.8% P/E EV/EBITDA Dividend yield, (prefs) 0.0% 0.0% 9.3% 12.7% 9.8% 13.6% Per Share Data EPS 0.81 0.92 0.19 0.27 0.21 0.28 DPS, ords 0.01 0.00 0.00 0.00 0.00 0.01 DPS, prefs 0.00 0.00 0.08 0.11 0.08 0.12 BVPS 5.56 6.32 1.90 6.96 7.08 7.25
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 28
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MOESK: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 40% 44,000 Revenues 111,732 129,366 125,324 124,206 124,026 128,953 Depreciation 13,340 16,539 17,395 18,660 20,035 21,179 38% 42,000 EBITDA 37,166 41,649 43,580 40,671 36,535 37,707 36% 40,000 Operating profit (EBIT) 23,827 25,110 26,186 22,010 16,501 16,528 34% 38,000 Net interest expense (2,236) (1,665) (789) (2,061) (2,722) (3,492) 32% 36,000 Non-op. revenue (expenses) 0 0 0 0 0 0 Pretax profit 21,590 23,445 25,397 19,950 13,779 13,036 30% 34,000 Taxes 4,427 5,402 6,447 3,990 2,756 2,607 28% 32,000 Minority interest (7) 95 (11) (9) (6) (6) 26% 30,000 Net income 17,163 18,043 18,950 15,960 11,023 10,429 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (18,302) 18,166 (7,590) (746) (2,584) (1,315) Provisions and write-offs 533 347 2,184 0 0 0 Other (548) (134) 389 0 0 0 Cash flows, RUBmn Operating cashflow 30,450 29,425 39,692 37,861 36,364 36,415 Capex (18,926) (29,322) (38,999) (44,300) (48,102) (40,052) 40,000 Disposals (Acquisitions) 452 1 218 0 0 0 30,000 Investing cashflow (19,040) (29,776) (38,703) (42,367) (46,169) (38,119) 20,000 Equity 0 0 (51) 0 0 0 10,000 Debt (10,496) 6,372 8,692 5,892 13,000 9,000 0 Financing cashflow (13,574) 1,365 3,397 449 6,964 2,511 (10,000) Net change in cash (2,163) 1,014 4,387 (4,057) (2,841) 808 (20,000) Balance sheet (30,000) Cash & equivalents 2,931 3,945 8,332 4,275 1,435 2,243 (40,000) Current assets 29,212 28,782 30,541 30,823 28,146 30,234 (50,000) PP&E 190,226 205,734 226,647 252,287 280,354 299,227 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 14,391 15,042 11,868 11,868 11,868 11,868 Operating cash flow Investing cash flow Total assets 233,829 249,559 269,057 294,978 320,368 341,329 Current liabilities 78,800 55,069 57,593 94,529 105,060 113,044 S-T Debt 10,631 6,509 4,071 35,923 43,707 49,095 L-T Debt 29,472 39,967 50,037 24,077 29,293 32,905 Momentum Other L-T liabilities 10,893 22,471 9,345 9,345 9,345 9,345 70% Shareholders funds 105,681 122,429 140,363 155,317 164,966 174,337 60% Total liabilities & equity 233,829 249,559 269,057 294,979 320,368 341,329 50% Net Debt 37,173 42,531 45,776 55,725 71,565 79,757 40% Margins and profitability 30% 20% EBIT margin 21.3% 19.4% 20.9% 17.7% 13.3% 12.8% 10% EBITDA margin 33.3% 32.2% 34.8% 32.7% 29.5% 29.2% 0% Net margin 15.4% 13.9% 15.1% 12.8% 8.9% 8.1% 0.10 ROE 16.2% 14.7% 13.5% 10.3% 6.7% 6.0% 0.20 ROA 7.3% 7.2% 7.0% 5.4% 3.4% 3.1% 0.30 ROIC 12.5% 10.5% 10.3% 9.0% 6.2% 5.8% 0.40 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 30% 16% -3% -1% -0% 4% Revenue growth EPS growth EBITDA growth 21% 12% 5% -7% -10% 3% EPS growth 63% 5% 5% -16% -31% -5% Liquidity and solvency Valuation Cash ratio 0.0 0.1 0.1 0.0 0.0 0.0 Current ratio 0.4 0.5 0.5 0.3 0.3 0.3 6 Interest coverage (10.7) (15.1) (33.2) (10.7) (6.1) (4.7) 5 Debt/Equity 0.4 0.4 0.4 0.4 0.4 0.5 Debt/Total assets 0.2 0.2 0.2 0.2 0.2 0.2 4 Net debt / EBITDA 1.0 1.0 1.1 1.4 2.0 2.1 3 Valuation P/E 3.3 3.1 3.0 3.5 5.1 5.4 2 P/CE 1.9 1.6 1.6 1.6 1.8 1.8 1 P/BV 0.5 0.5 0.4 0.4 0.3 0.3 EV/Sales 0.8 0.8 0.8 0.9 1.0 1.1 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 2.5 2.4 2.3 2.8 3.5 3.6 Dividend yield, (ords) 2.1% 2.1% 2.6% 2.4% 1.9% 2.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.35 0.37 0.39 0.33 0.23 0.21 DPS, ords 0.02 0.02 0.03 0.03 0.02 0.02 DPS, prefs ------BVPS 2.17 2.51 2.88 3.19 3.39 3.58
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 29
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
Lenenergo: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 45% 17,000 Revenues 28,574 32,257 33,135 33,820 34,580 32,238 Depreciation 4,431 4,813 4,216 4,583 4,904 5,230 40% 15,000 EBITDA 11,564 5,566 6,691 9,682 9,223 5,725 35% 13,000 Operating profit (EBIT) 7,133 754 2,475 5,099 4,319 495 Net interest expense (805) (1,598) (1,873) (1,825) (2,130) (2,480) 30% 11,000 Non-op. revenue (expenses) (70) 0 0 0 0 0 25% 9,000 Pretax profit 6,257 (845) 602 3,273 2,188 (1,985) Taxes 1,507 99 370 655 438 0 20% 7,000 Minority interest 4 7 (2) (20) (13) 15 15% 5,000 Net income 4,750 (943) 233 2,619 1,751 (1,985) 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,672) 419 (1,898) 1,292 (759) (606) Provisions and write-offs 0 0 0 0 0 0 Other 94 358 66 0 0 0 Cash flows, RUBmn Operating cashflow 3,856 7,944 7,475 5,983 7,486 3,923 Capex (5,826) (11,789) (11,275) (12,844) (11,237) (11,390) 10,000 Disposals (Acquisitions) (99) (120) (76) 0 0 0 Investing cashflow (5,170) (11,846) (13,313) (12,542) (10,935) (11,088) 5,000 Equity 0 0 2,044 0 0 0 Debt 661 12,238 789 5,209 3,500 6,500 0 Financing cashflow (902) 10,357 2,243 4,947 3,325 6,500 Net change in cash (2,215) 6,456 (3,595) (1,612) (123) (665) (5,000) Balance sheet (10,000) Cash & equivalents 653 7,109 3,514 1,982 1,859 1,194 Current assets 6,372 11,993 11,236 9,062 8,985 8,233 (15,000) PP&E 83,622 82,519 86,415 94,676 101,009 107,170 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,072 1,584 1,234 1,234 1,234 1,234 Operating cash flow Investing cash flow Total assets 93,382 96,951 99,393 105,480 111,736 117,145 Current liabilities 21,497 25,035 30,567 23,523 24,546 25,467 S-T Debt 1,566 6,356 7,153 2,044 2,261 2,663 L-T Debt 14,125 21,028 20,638 30,956 34,239 40,337 Momentum Other L-T liabilities 2,116 4,884 1,786 1,786 1,786 1,786 100% Shareholders funds 49,937 42,504 43,513 46,004 47,556 45,355 Total liabilities & equity 93,382 96,951 99,393 105,480 111,736 117,145 80% Net Debt 15,038 20,276 24,277 31,018 34,641 41,806 60% Margins and profitability 40% EBIT margin 25.0% 2.3% 7.5% 15.1% 12.5% 1.5% EBITDA margin 40.5% 17.3% 20.2% 28.6% 26.7% 17.8% 20% Net margin 16.6% (2.9%) 0.7% 7.7% 5.1% (6.2%) 0% ROE 9.5% (2.2%) 0.5% 5.7% 3.7% (4.4%) 0.2 ROA 5.1% (1.0%) 0.2% 2.5% 1.6% (1.7%) ROIC 8.0% 0.9% 3.0% 5.1% 4.0% 0.4% 0.4 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 25% 13% 3% 2% 2% -7% Revenue growth EPS growth EBITDA growth 41% -52% 20% 45% -5% -38% EPS growth 84% n/m n/m 1,025% -33% n/m Liquidity and solvency Valuation Cash ratio 0.0 0.3 0.1 0.1 0.1 0.0 Current ratio 0.3 0.5 0.4 0.4 0.4 0.3 25 Interest coverage (8.9) (0.5) (1.3) (2.8) (2.0) (0.2) Debt/Equity 0.3 0.6 0.6 0.7 0.8 0.9 20 Debt/Total assets 0.2 0.3 0.3 0.3 0.3 0.4 15 Net debt / EBITDA 1.3 3.6 3.6 3.2 3.8 7.3 Valuation 10 P/E 1.0 nm 20.4 1.8 2.7 nm P/CE 0.5 1.2 1.1 0.7 0.7 1.5 5 P/BV 0.1 0.1 0.1 0.1 0.1 0.1 EV/Sales 0.7 0.8 0.9 1.1 1.1 1.4 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 1.7 4.5 4.3 3.7 4.3 8.1 Dividend yield, (ords) 7.4% 8.7% 2.8% 6.0% 4.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) 0.0% 0.0% 0.0% 0.0% 8.3% 16.6% Per Share Data EPS 3.87 (0.77) 0.19 2.13 1.43 (1.62) DPS, ords 0.29 0.34 0.11 0.23 0.15 0.00 DPS, prefs 0.00 0.00 0.00 0.00 1.00 2.00 BVPS 40.65 34.60 35.42 37.45 38.72 36.92
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 30
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK Center: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 26% 27,000 Revenues 60,614 69,041 69,984 76,400 79,652 82,976 25% 25,000 Depreciation 5,011 6,285 6,738 7,159 7,639 8,182 24% 23,000 EBITDA 12,908 15,217 14,850 17,617 18,110 18,591 23% 21,000 Operating profit (EBIT) 7,897 8,932 7,556 10,458 10,471 10,409 22% 19,000 Net interest expense (1,507) (1,556) (1,812) (2,423) (2,601) (2,807) 21% 17,000 Non-op. revenue (expenses) 0 0 0 0 0 0 20% 15,000 Pretax profit 6,390 7,376 5,745 8,035 7,870 7,602 19% 13,000 Taxes 1,289 1,841 1,316 1,607 1,574 1,520 18% 11,000 Minority interest 4 4 23 34 33 32 17% 9,000 Net income 5,101 5,534 4,429 6,428 6,296 6,081 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 2,029 (533) 2,321 (1,959) 292 320 Provisions and write-offs 0 0 0 0 0 0 Other (260) (47) (31) (142) (144) (153) Cash flows, RUBmn Operating cashflow 8,418 12,818 10,544 15,404 13,499 13,790 Capex (10,590) (15,716) (16,685) (14,750) (16,800) (19,000) 20,000 Disposals (Acquisitions) (1,075) 0 0 0 0 0 15,000 Investing cashflow (11,586) (15,542) (16,489) (14,608) (16,656) (18,847) Equity 0 0 0 0 0 0 10,000 Debt 3,059 0 0 1,997 2,000 6,500 5,000 Financing cashflow 3,059 5,111 4,270 1,134 683 5,147 0 Net change in cash (109) 2,387 (1,675) 1,930 (2,473) 91 (5,000) Balance sheet (10,000) Cash & equivalents 259 2,646 972 2,902 429 519 (15,000) Current assets 9,333 12,968 16,809 14,831 12,840 13,425 (20,000) PP&E 51,779 62,196 71,360 78,951 88,112 98,930 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,860 1,653 1,402 1,402 1,402 1,402 Operating cash flow Investing cash flow Total assets 62,972 76,817 89,572 95,184 102,353 113,757 Current liabilities 9,543 11,325 13,560 26,678 27,940 31,599 S-T Debt 1,166 1,167 207 15,275 16,346 19,830 L-T Debt 13,770 20,070 26,296 13,225 14,154 17,170 Momentum Other L-T liabilities 232 354 441 441 441 441 50% Shareholders funds 33,647 38,567 42,550 48,081 53,026 57,723 40% Total liabilities & equity 62,972 76,817 89,572 95,184 102,354 113,757 Net Debt 14,677 18,591 25,531 25,598 30,071 36,481 30% Margins and profitability 20% EBIT margin 13.0% 12.9% 10.8% 13.7% 13.1% 12.5% 10% EBITDA margin 21.3% 22.0% 21.2% 23.1% 22.7% 22.4% 0% Net margin 8.4% 8.0% 6.3% 8.4% 7.9% 7.3% 0.10 ROE 15.2% 14.3% 10.4% 13.4% 11.9% 10.5% 0.20 ROA 8.1% 7.2% 4.9% 6.8% 6.2% 5.3% ROIC 11.9% 11.4% 8.1% 12.8% 11.3% 10.2% 0.30 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 23% 14% 1% 9% 4% 4% Revenue growth EPS growth EBITDA growth 37% 18% -2% 19% 3% 3% EPS growth 142% 8% -20% 45% -2% -3% Liquidity and solvency Valuation Cash ratio 0.0 0.2 0.1 0.1 0.0 0.0 Current ratio 1.0 1.1 1.2 0.6 0.5 0.4 6 Interest coverage (5.2) (5.7) (4.2) (4.3) (4.0) (3.7) 5 Debt/Equity 0.4 0.6 0.6 0.6 0.6 0.6 Debt/Total assets 0.2 0.3 0.3 0.3 0.3 0.3 4 Net debt / EBITDA 1.1 1.2 1.7 1.5 1.7 2.0 3 Valuation P/E 2.3 2.1 2.6 1.8 1.9 1.9 2 P/CE 1.2 1.0 1.0 0.9 0.8 0.8 1 P/BV 0.3 0.3 0.3 0.2 0.2 0.2 EV/Sales 0.4 0.4 0.5 0.5 0.5 0.6 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 2.0 2.0 2.5 2.1 2.3 2.6 Dividend yield, (ords) 5.2% 3.6% 7.4% 11.3% 11.6% 11.7% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.12 0.13 0.10 0.15 0.15 0.14 DPS, ords 0.01 0.01 0.02 0.03 0.03 0.03 DPS, prefs ------BVPS 0.80 0.91 1.01 1.14 1.26 1.37
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 31
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK Center&Volga: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 20% 16,000 Revenues 54,630 64,590 60,082 63,542 63,821 66,632 19% 15,000 Depreciation 3,640 4,270 5,669 5,954 6,306 6,721 18% 14,000 EBITDA 5,900 11,058 9,232 11,263 9,695 10,266 17% 13,000 Operating profit (EBIT) 2,260 6,788 3,596 5,309 3,389 3,546 16% 12,000 15% 11,000 Net interest expense (1,040) (1,021) (1,524) (1,979) (1,744) (2,241) 14% 10,000 Non-op. revenue (expenses) (4) 0 0 0 0 0 13% 9,000 Pretax profit 1,216 5,767 2,072 3,330 1,646 1,305 12% 8,000 Taxes 381 1,243 529 666 329 261 11% 7,000 10% 6,000 Minority interest 0 0 0 0 0 0 9% 5,000 Net income 835 4,524 1,544 2,664 1,317 1,044 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,534) 3,141 1,042 (4,734) 269 (341) Provisions and write-offs 0 0 0 0 0 0 Other (2) (0) 0 (127) (56) (39) Cash flows, RUBmn Operating cashflow 5,723 8,435 4,867 13,225 7,297 8,067 Capex (8,132) (12,936) (8,929) (9,981) (12,307) (14,533) 15,000 Disposals (Acquisitions) 22 183 2,611 0 0 0 Investing cashflow (8,068) (15,110) (7,145) (9,854) (12,251) (14,494) 10,000 Equity 0 0 0 0 0 0 5,000 Debt 3,023 7,556 1,275 (4,339) 5,000 7,000 0 Financing cashflow 3,022 7,424 956 (4,818) 4,600 6,671 (5,000) Net change in cash 677 750 (1,322) (1,447) (353) 244 Balance sheet (10,000) Cash & equivalents 3,179 3,928 2,606 1,159 806 1,050 (15,000) Current assets 8,983 13,684 14,155 9,701 9,422 9,969 (20,000) PP&E 45,135 54,292 57,998 62,025 68,027 75,839 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 900 1,088 1,156 1,156 1,156 1,156 Operating cash flow Investing cash flow Total assets 55,019 69,064 73,309 72,882 78,604 86,964 Current liabilities 8,244 9,151 10,249 11,820 12,116 13,450 S-T Debt 1,678 1,776 2,122 1,966 2,458 3,146 L-T Debt 13,869 21,374 22,217 18,034 22,542 28,854 Momentum Other L-T liabilities 649 809 1,108 1,108 1,108 1,108 80% Shareholders funds 28,759 33,121 34,344 36,529 37,446 38,160 60% Total liabilities & equity 55,019 69,064 73,309 72,882 78,604 86,964 Net Debt 12,369 19,221 21,733 18,841 24,194 30,950 40% Margins and profitability 20% EBIT margin 4.1% 10.5% 6.0% 8.4% 5.3% 5.3% 0% EBITDA margin 10.8% 17.1% 15.4% 17.7% 15.2% 15.4% 0.2 Net margin 1.5% 7.0% 2.6% 4.2% 2.1% 1.6% 0.4 ROE 2.9% 13.7% 4.5% 7.3% 3.5% 2.7% 0.6 ROA 1.5% 6.6% 2.1% 3.7% 1.7% 1.2% ROIC 4.1% 9.7% 4.8% 7.1% 4.1% 3.9% 0.8 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 15% 18% -7% 6% 0% 4% Revenue growth EPS growth EBITDA growth -1% 87% -17% 22% -14% 6% EPS growth 9% 442% -66% 73% -51% -21% Liquidity and solvency Valuation Cash ratio 0.4 0.4 0.3 0.1 0.1 0.1 Current ratio 1.1 1.5 1.4 0.8 0.8 0.7 16 Interest coverage (2.2) (6.6) (2.4) (2.7) (1.9) (1.6) 14 Debt/Equity 0.5 0.7 0.7 0.5 0.7 0.8 12 Debt/Total assets 0.3 0.3 0.3 0.3 0.3 0.4 10 Net debt / EBITDA 2.1 1.7 2.4 1.7 2.5 3.0 8 Valuation 6 P/E 13.8 2.5 7.4 4.3 8.7 11.0 P/CE 2.6 1.3 1.6 1.3 1.5 1.5 4 P/BV 0.4 0.3 0.3 0.3 0.3 0.3 2 EV/Sales 0.4 0.5 0.6 0.5 0.6 0.6 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 4.0 2.8 3.6 2.7 3.7 4.1 Dividend yield, (ords) 1.2% 2.8% 4.2% 3.5% 2.9% 2.3% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.01 0.04 0.01 0.02 0.01 0.01 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.26 0.29 0.30 0.32 0.33 0.34
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 32
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK North-West: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012E 2013E 2014E 2015E Income statement 14% 5,500 Revenues 28,900 33,288 33,419 35,297 36,428 37,608 Depreciation 2,577 2,884 3,083 3,258 3,428 3,615 13% 5,000 EBITDA 2,355 4,198 3,656 4,271 4,372 4,646 12% 4,500 Operating profit (EBIT) (159) 1,325 574 1,013 943 1,031 11% 4,000 Net interest expense (397) (259) (416) (926) (1,080) (1,280) 10% 3,500 Non-op. revenue (expenses) 284 187 308 0 0 0 Pretax profit (273) 1,253 466 87 (137) (249) 9% 3,000 Taxes 40 451 103 17 0 0 8% 2,500 Minority interest (0) 1 0 1 0 0 7% 2,000 Net income (313) 802 362 69 (137) (249) 2009 2010 2011 2012E 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,126) (673) 2,081 (1,525) (12) 8 Provisions and write-offs 0 0 0 0 0 0 Other 1 (5) 0 0 0 0 Cash flows, RUBmn Operating cashflow 3,428 3,675 1,820 4,852 3,304 3,358 Capex (2,841) (4,908) (7,196) (6,133) (5,955) (6,545) 6,000 Disposals (Acquisitions) 86 50 137 0 0 0 Investing cashflow (2,746) (4,838) (7,037) (6,133) (5,955) (6,545) 4,000 Equity 0 0 0 0 0 0 2,000 Debt (93) 1,544 4,410 1,852 2,000 3,000 0 Financing cashflow (97) 1,544 4,409 1,848 1,999 3,000 (2,000) Net change in cash 585 381 (808) 567 (652) (186) Balance sheet (4,000) Cash & equivalents 1,155 1,535 727 1,295 643 457 (6,000) Current assets 6,356 7,225 7,959 7,220 6,739 6,726 (8,000) PP&E 27,223 29,523 33,251 36,126 38,652 41,581 2009 2010 2011 2012E 2013E 2014E 2015E Goodwill and other assets 923 794 849 849 849 849 Operating cash flow Investing cash flow Total assets 34,502 37,542 42,058 44,195 46,239 49,156 Current liabilities 5,373 6,308 5,706 10,975 11,968 13,351 S-T Debt 308 80 19 5,069 5,880 7,097 L-T Debt 4,373 6,148 10,629 7,431 8,620 10,403 Momentum Other L-T liabilities 813 265 403 403 403 403 20% Shareholders funds 20,804 21,593 21,953 22,018 21,879 21,629 Total liabilities & equity 34,502 37,542 42,058 44,194 46,239 49,155 0% Net Debt 3,526 4,694 9,921 11,205 13,857 17,043 0.2 Margins and profitability EBIT margin (0.6%) 4.0% 1.7% 2.9% 2.6% 2.7% 0.4 EBITDA margin 8.1% 12.6% 10.9% 12.1% 12.0% 12.4% 0.6 Net margin (1.1%) 2.4% 1.1% 0.2% (0.4%) (0.7%) ROE (1.5%) 3.7% 1.7% 0.3% (0.6%) (1.2%) 0.8 ROA (0.9%) 2.1% 0.9% 0.2% (0.3%) (0.5%) ROIC (0.5%) 3.6% 1.3% 2.5% 2.2% 2.3% 1.0 2009 2010 2011 2012E 2013E 2014E 2015E Momentum Revenue growth 8% 15% 0% 6% 3% 3% Revenue growth EPS growth EBITDA growth -25% 78% -13% 17% 2% 6% EPS growth n/m n/m -55% -81% n/m n/m Liquidity and solvency Valuation Cash ratio 0.2 0.2 0.1 0.1 0.1 0.0 Current ratio 1.2 1.1 1.4 0.7 0.6 0.5 12 Interest coverage 0.4 (5.1) (1.4) (1.1) (0.9) (0.8) 10 Debt/Equity 0.2 0.3 0.5 0.6 0.7 0.8 Debt/Total assets 0.1 0.2 0.3 0.3 0.3 0.4 8 Net debt / EBITDA 1.5 1.1 2.7 2.6 3.2 3.7 6 Valuation P/E nm 4.6 10.2 nm nm nm 4 P/CE 1.6 1.0 1.1 1.1 1.1 1.1 2 P/BV 0.2 0.2 0.2 0.2 0.2 0.2 EV/Sales 0.2 0.3 0.4 0.4 0.5 0.6 0 2009 2010 2011 2012E 2013E 2014E 2015E EV/EBITDA 3.1 2.0 3.7 3.5 4.0 4.5 Dividend yield, (ords) 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS (0.00) 0.01 0.00 0.00 (0.00) (0.00) DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.22 0.23 0.23 0.23 0.23 0.23
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 33
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK Siberia: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 12% 6,000 Revenues 43,829 52,312 49,514 52,591 55,566 58,342 11% 5,500 Depreciation 3,598 3,726 4,177 4,350 4,520 4,707 10% 5,000 EBITDA 1,717 3,837 5,002 4,546 4,623 4,384 9% 4,500 Operating profit (EBIT) (1,880) 111 826 196 103 (323) 8% 4,000 Net interest expense (754) (421) 232 (534) (610) (664) 7% 3,500 Non-op. revenue (expenses) 0 0 0 0 0 0 6% 3,000 Pretax profit (2,635) (310) 1,057 (338) (507) (987) 5% 2,500 Taxes (243) 165 208 0 0 0 4% 2,000 Minority interest 0 0 0 (0) (0) (0) 3% 1,500 Net income (2,392) (475) 849 (338) (507) (987) 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,272) (5,442) 4,232 (1,109) (1,461) (1,396) Provisions and write-offs 0 0 0 0 0 0 Other 0 0 0 0 0 0 Cash flows, RUBmn Operating cashflow 2,590 7,921 4,823 5,655 6,083 5,780 Capex (3,776) (6,876) (5,132) (6,060) (5,957) (6,550) 8,000 Disposals (Acquisitions) 88 422 (46) 0 0 0 6,000 Investing cashflow (3,673) (6,404) (5,037) (6,050) (5,902) (6,479) Equity 0 0 0 0 0 0 4,000 Debt 2,156 (1,998) (91) 2,458 1,000 1,000 2,000 Financing cashflow 1,397 (788) (642) 1,914 335 265 0 Net change in cash 314 729 (856) 1,519 517 (434) (2,000) Balance sheet (4,000) Cash & equivalents 454 1,184 328 1,848 2,364 1,930 (6,000) Current assets 7,623 8,239 9,644 10,960 11,926 11,920 (8,000) PP&E 35,642 39,142 40,053 41,763 43,200 45,043 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,487 1,499 1,116 1,116 1,116 1,116 Operating cash flow Investing cash flow Total assets 44,752 48,880 50,813 53,839 56,242 58,079 Current liabilities 10,305 14,211 14,887 19,112 21,723 24,249 S-T Debt 1,771 347 2,995 6,314 7,015 7,717 L-T Debt 6,853 6,279 3,547 2,686 2,985 3,283 Momentum Other L-T liabilities 614 110 3,219 3,219 3,219 3,219 20% Shareholders funds 23,813 25,000 25,755 25,417 24,910 23,922 Total liabilities & equity 44,752 48,880 50,813 53,839 56,242 58,079 15% Net Debt 8,170 5,443 6,214 7,152 7,636 9,070 10% Margins and profitability EBIT margin (4.3%) 0.2% 1.7% 0.4% 0.2% (0.6%) 5% EBITDA margin 3.9% 7.3% 10.1% 8.6% 8.3% 7.5% 0% Net margin (5.5%) (0.9%) 1.7% (0.6%) (0.9%) (1.7%) ROE (10.0%) (1.9%) 3.3% (1.3%) (2.0%) (4.1%) 0.05 ROA (5.3%) (1.0%) 1.7% (0.6%) (0.9%) (1.7%) ROIC (4.4%) 0.3% 1.9% 0.5% 0.3% (0.8%) 0.10 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 10% 19% -5% 6% 6% 5% Revenue growth EPS growth EBITDA growth -52% 123% 30% -9% 2% -5% EPS growth n/m n/m n/m n/m n/m n/m Liquidity and solvency Valuation Cash ratio 0.0 0.1 0.0 0.1 0.1 0.1 Current ratio 0.7 0.6 0.6 0.6 0.5 0.5 10 Interest coverage 2.5 (0.3) 3.6 (0.4) (0.2) 0.5 9 Debt/Equity 0.4 0.3 0.3 0.4 0.4 0.5 8 7 Debt/Total assets 0.2 0.1 0.1 0.2 0.2 0.2 6 Net debt / EBITDA 4.8 1.4 1.2 1.6 1.7 2.1 5 Valuation 4 P/E nm nm 8.3 nm nm nm 3 P/CE 5.8 2.2 1.4 1.8 1.8 1.9 2 P/BV 0.3 0.3 0.3 0.3 0.3 0.3 1 EV/Sales 0.4 0.2 0.3 0.3 0.3 0.3 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 9.1 3.4 2.7 3.2 3.3 3.8 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS (0.03) (0.01) 0.01 (0.00) (0.01) (0.01) DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.27 0.28 0.29 0.28 0.28 0.27
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 34
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK of South: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 25% 6,000 Revenues 22,014 23,194 24,286 25,280 26,869 28,080 Depreciation 2,052 2,158 2,598 2,727 2,830 2,944 20% 5,000 EBITDA 4,089 1,078 5,384 4,764 5,421 5,826 Operating profit (EBIT) 2,037 (1,080) 2,786 2,038 2,591 2,882 15% 4,000 Net interest expense (1,725) (1,410) (1,474) (2,084) (1,920) (1,960) Non-op. revenue (expenses) (4,142) 0 0 0 0 0 10% 3,000 Pretax profit (3,830) (2,490) 1,312 (46) 671 922 Taxes (241) (360) 320 0 134 184 5% 2,000 Minority interest 0 0 0 0 0 0 0% 1,000 Net income (3,590) (2,130) 991 (46) 537 738 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (1,471) (5,148) 1,785 1,009 (335) 518 Provisions and write-offs 0 0 0 0 0 0 Other (7) 868 (581) 0 0 0 Cash flows, RUBmn Operating cashflow 60 2,504 3,494 1,671 3,702 3,164 Capex (3,374) (4,497) (4,461) (4,523) (3,597) (3,991) 4,000 Disposals (Acquisitions) 0 (372) (6) 0 0 0 3,000 Investing cashflow (2,044) (4,854) (4,448) (4,523) (3,597) (3,991) 2,000 Equity 0 0 0 0 0 0 1,000 Debt 983 5,374 2,749 1,691 0 1,000 0 Financing cashflow 922 3,580 1,282 1,691 0 946 (1,000) Net change in cash (1,062) 1,230 328 (1,160) 105 119 (2,000) Balance sheet (3,000) Cash & equivalents 358 1,421 1,749 589 694 813 (4,000) Current assets 10,509 6,998 9,562 9,281 9,103 10,441 (5,000) PP&E 26,573 22,344 24,689 26,485 27,252 28,299 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 789 1,874 959 959 959 959 Operating cash flow Investing cash flow Total assets 37,871 31,217 35,210 36,725 37,315 39,700 Current liabilities 8,199 10,214 13,632 13,144 13,197 14,125 S-T Debt 1,400 2,841 5,809 5,451 5,451 5,678 L-T Debt 12,767 16,473 16,500 18,549 18,549 19,322 Momentum Other L-T liabilities 19 765 316 316 316 316 50% Shareholders funds 16,599 3,598 4,578 4,531 5,068 5,752 45% Total liabilities & equity 37,871 31,217 35,210 36,725 37,315 39,700 40% Net Debt 13,809 17,893 20,559 23,411 23,306 24,187 35% Margins and profitability 30% EBIT margin 9.3% (4.7%) 11.5% 8.1% 9.6% 10.3% 25% EBITDA margin 18.6% 4.6% 22.2% 18.8% 20.2% 20.7% 20% Net margin (16.3%) (9.2%) 4.1% (0.2%) 2.0% 2.6% 15% ROE (21.6%) (59.2%) 21.7% (1.0%) 10.6% 12.8% 10% ROA (9.5%) (6.8%) 2.8% (0.1%) 1.4% 1.9% 5% ROIC 5.6% (4.4%) 11.2% 7.1% 8.8% 9.3% 0% 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 16% 5% 5% 4% 6% 5% Revenue growth EPS growth EBITDA growth 7% -74% 399% -12% 14% 7% EPS growth n/m n/m n/m n/m n/m 37% Liquidity and solvency Valuation Cash ratio 0.0 0.1 0.1 0.0 0.1 0.1 Current ratio 1.3 0.7 0.7 0.7 0.7 0.7 20 Interest coverage (1.2) 0.8 (1.9) (1.0) (1.3) (1.5) 18 Debt/Equity 0.9 5.4 4.9 5.3 4.7 4.3 16 14 Debt/Total assets 0.4 0.6 0.6 0.7 0.6 0.6 12 Net debt / EBITDA 3.4 16.6 3.8 4.9 4.3 4.2 10 Valuation 8 P/E nm nm 1.8 nm 3.3 2.4 6 P/CE nm 62.1 0.5 0.7 0.5 0.5 4 P/BV 0.1 0.5 0.4 0.4 0.3 0.3 2 EV/Sales 0.7 0.8 0.9 1.0 0.9 0.9 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 3.8 18.2 4.1 5.3 4.6 4.5 Dividend yield, (ords) 0.0% 0.0% 0.0% 0.0% 3.1% 4.2% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS (0.07) (0.04) 0.02 (0.00) 0.01 0.01 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.33 0.07 0.09 0.09 0.10 0.12
Sources: Company data, Otkritie Capital estimates
Important information available at https://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.
Otkritie Capital 35
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK of Ural: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 16% 9,000 Revenues 57,066 62,000 59,431 63,579 67,446 71,489 15% 8,500 Depreciation 3,791 4,152 4,894 5,105 5,316 5,541 EBITDA 7,847 8,242 5,397 6,032 6,311 6,764 14% 8,000 Operating profit (EBIT) 4,057 4,090 503 927 994 1,223 13% 7,500 Net interest expense (509) (221) 19 (723) (868) (1,011) 12% 7,000 Non-op. revenue (expenses) 0 0 0 0 0 0 11% 6,500 Pretax profit 3,814 4,115 589 276 203 293 10% 6,000 Taxes 1,432 844 344 55 41 59 9% 5,500 Minority interest 50 68 (37) 0 0 0 8% 5,000 Net income 2,382 3,271 246 221 162 234 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. 507 (406) (759) 181 149 130 Provisions and write-offs 0 0 0 0 0 0 Other (25) 62 126 0 0 0 Cash flows, RUBmn Operating cashflow 6,978 7,481 6,303 5,867 6,198 6,656 Capex (5,663) (8,323) (7,987) (7,382) (7,411) (7,873) 8,000 Disposals (Acquisitions) 419 432 278 0 0 0 6,000 Investing cashflow (5,220) (7,911) (6,730) (7,313) (7,369) (7,834) Equity 0 0 0 0 0 0 4,000 Debt 5,117 6,800 2,400 1,366 2,000 2,000 2,000 Financing cashflow (1,332) (17) 1,591 418 1,079 942 0 Net change in cash 425 (447) 1,164 (1,028) (92) (235) (2,000) Balance sheet (4,000) Cash & equivalents 1,877 1,430 2,594 1,566 1,474 1,238 (6,000) Current assets 9,740 9,553 10,521 9,989 10,363 10,618 (8,000) PP&E 48,311 52,999 54,844 57,121 59,216 61,547 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 1,632 1,609 1,386 1,386 1,386 1,386 Operating cash flow Investing cash flow Total assets 59,781 64,246 66,825 68,571 71,039 73,627 Current liabilities 8,250 8,948 9,447 10,739 11,331 11,966 S-T Debt 699 731 667 1,645 1,919 2,193 L-T Debt 6,381 7,316 9,967 10,355 12,081 13,807 Momentum Other L-T liabilities 11 0 0 0 0 0 100% Shareholders funds 38,738 41,639 41,666 41,731 41,882 42,108 80% Total liabilities & equity 59,781 64,246 66,825 68,571 71,039 73,627 60% Net Debt 5,204 6,616 8,040 10,434 12,526 14,762 40% Margins and profitability 20% EBIT margin 7.1% 6.6% 0.8% 1.5% 1.5% 1.7% 0% EBITDA margin 13.8% 13.3% 9.1% 9.5% 9.4% 9.5% 0.2 Net margin 4.2% 5.3% 0.4% 0.3% 0.2% 0.3% 0.4 ROE 6.1% 7.9% 0.6% 0.5% 0.4% 0.6% 0.6 ROA 4.0% 5.1% 0.4% 0.3% 0.2% 0.3% 0.8 ROIC 6.5% 6.1% 0.7% 1.3% 1.4% 1.6% 1.0 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 19% 9% -4% 7% 6% 6% Revenue growth EPS growth EBITDA growth 18% 5% -35% 12% 5% 7% EPS growth 22% 37% -92% -10% -27% 45% Liquidity and solvency Valuation Cash ratio 0.2 0.2 0.3 0.1 0.1 0.1 Current ratio 1.2 1.1 1.1 0.9 0.9 0.9 45 Interest coverage (8.0) (18.5) 27.2 (1.3) (1.1) (1.2) 40 Debt/Equity 0.2 0.2 0.3 0.3 0.3 0.4 35 Debt/Total assets 0.1 0.1 0.2 0.2 0.2 0.2 30 Net debt / EBITDA 0.7 0.8 1.5 1.7 2.0 2.2 25 Valuation 20 P/E 4.0 2.9 38.4 42.7 nm 40.2 15 P/CE 1.5 1.3 1.8 1.8 1.7 1.6 10 P/BV 0.2 0.2 0.2 0.2 0.2 0.2 5 EV/Sales 0.3 0.3 0.3 0.3 0.3 0.3 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 1.9 1.9 3.2 3.3 3.5 3.6 Dividend yield, (ords) 2.6% 1.4% 1.7% 0.1% 0.1% 0.1% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.03 0.04 0.00 0.00 0.00 0.00 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.44 0.48 0.48 0.48 0.48 0.48
Sources: Company data, Otkritie Capital estimates
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Otkritie Capital 36
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
MRSK of Volga: Financial forecasts
RUBmn unless otherwise stated Profitability 2010 2011 2012 2013E 2014E 2015E Income statement 19% 8,500 Revenues 39,560 48,037 45,908 49,596 51,742 54,125 18% 8,000 Depreciation 2,811 3,267 3,602 3,857 4,116 4,407 17% 7,500 EBITDA 3,978 5,675 7,167 7,868 7,924 8,140 16% 7,000 Operating profit (EBIT) 1,167 2,407 3,564 4,011 3,808 3,734 15% 6,500 Net interest expense (278) (250) (336) (669) (886) (1,096) 14% 6,000 Non-op. revenue (expenses) 0 0 0 0 0 0 13% 5,500 Pretax profit 888 2,157 3,228 3,342 2,922 2,638 12% 5,000 Taxes 321 392 854 668 584 528 11% 4,500 10% 4,000 Minority interest 0 0 0 0 0 0 9% 3,500 Net income 567 1,765 2,374 2,674 2,338 2,110 2009 2010 2011 2012 2013E 2014E 2015E Cash flow statement EBITDA margin (LHS) EBITDA,RUBm Net change in work. cap. (2,258) (825) 815 51 (40) 103 Provisions and write-offs (1) (34) (13) 0 0 0 Other (23) 35 69 0 0 0 Cash flows, RUBmn Operating cashflow 5,717 6,045 5,483 6,435 6,450 6,370 Capex (4,190) (7,191) (8,957) (8,903) (9,090) (10,160) 8,000 Disposals (Acquisitions) 23 17 (29) 0 0 0 6,000 Investing cashflow (4,164) (7,160) (8,942) (8,859) (9,046) (10,116) 4,000 Equity 0 0 0 0 0 0 2,000 Debt (503) 1,815 3,850 2,216 5,000 2,000 0 Financing cashflow (503) 1,654 3,533 1,925 4,690 1,699 (2,000) Net change in cash 1,050 539 74 (499) 2,094 (2,047) (4,000) Balance sheet (6,000) (8,000) Cash & equivalents 1,476 2,014 2,088 1,590 3,684 1,637 (10,000) Current assets 5,198 8,161 7,151 7,069 9,386 7,581 (12,000) PP&E 26,734 31,266 37,020 42,066 47,040 52,793 2009 2010 2011 2012 2013E 2014E 2015E Goodwill and other assets 732 709 696 696 696 696 Operating cash flow Investing cash flow Total assets 32,664 40,136 44,867 49,832 57,122 61,071 Current liabilities 3,825 7,065 5,151 5,871 6,295 6,499 S-T Debt 88 80 66 420 581 646 L-T Debt 5,194 6,921 10,719 12,580 17,419 19,354 Momentum Other L-T liabilities 252 196 385 385 385 385 40% Shareholders funds 21,701 23,465 25,639 28,022 30,050 31,860 30% Total liabilities & equity 32,664 40,136 44,867 49,832 57,122 61,071 20% Net Debt 3,807 4,987 8,696 11,410 14,316 18,363 10% Margins and profitability 0% EBIT margin 2.9% 5.0% 7.8% 8.1% 7.4% 6.9% 0.10 EBITDA margin 10.1% 11.8% 15.6% 15.9% 15.3% 15.0% 0.20 Net margin 1.4% 3.7% 5.2% 5.4% 4.5% 3.9% 0.30 ROE 2.6% 7.5% 9.3% 9.5% 7.8% 6.6% 0.40 ROA 1.7% 4.4% 5.3% 5.4% 4.1% 3.5% 0.50 ROIC 3.4% 6.2% 7.6% 7.6% 6.5% 5.6% 0.60 2009 2010 2011 2012 2013E 2014E 2015E Momentum Revenue growth 34% 21% -4% 8% 4% 5% Revenue growth EPS growth EBITDA growth -18% 43% 26% 10% 1% 3% EPS growth -57% 211% 35% 13% -13% -10% Liquidity and solvency Valuation Cash ratio 0.4 0.3 0.4 0.3 0.6 0.3 Current ratio 1.4 1.2 1.4 1.2 1.5 1.2 12 Interest coverage (4.2) (9.6) (10.6) (6.0) (4.3) (3.4) 10 Debt/Equity 0.2 0.3 0.4 0.5 0.6 0.6 Debt/Total assets 0.2 0.2 0.2 0.3 0.3 0.3 8 Net debt / EBITDA 1.0 0.9 1.2 1.5 1.8 2.3 6 Valuation P/E 11.3 3.6 2.7 2.4 2.7 3.0 4 P/CE 1.9 1.3 1.1 1.0 1.0 1.0 2 P/BV 0.3 0.3 0.3 0.2 0.2 0.2 EV/Sales 0.3 0.2 0.3 0.4 0.4 0.5 0 2009 2010 2011 2012 2013E 2014E 2015E EV/EBITDA 2.6 2.0 2.1 2.3 2.6 3.0 Dividend yield, (ords) 0.0% 3.1% 4.5% 4.8% 4.7% 6.9% P/E EV/EBITDA Dividend yield, (prefs) ------Per Share Data EPS 0.00 0.01 0.01 0.01 0.01 0.01 DPS, ords 0.00 0.00 0.00 0.00 0.00 0.00 DPS, prefs ------BVPS 0.12 0.13 0.14 0.16 0.17 0.18
Sources: Company data, Otkritie Capital estimates
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Otkritie Capital 37
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
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Otkritie Capital 38
Russian Utilities | UPDATE / DOWNGRADE | Russia | 20 September 2013
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Otkritie Capital 39
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RESEARCH Alexander Burgansky Head of Research [email protected] +7 (495) 213 1825 Equity Research Fixed Income Research
Vladimir Savov Head of Equity Research [email protected] +7 (495) 213 1826
Strategy Metals & Mining, Fertilizers Sovereign Credit Vladimir Savov Denis Gabrielik Maxim Grebtsov [email protected] [email protected] [email protected] +7 (495) 213 1826 +7 (495) 213 1831 +7 (495) 777 5656 (x114340) Andy Jones Economics [email protected] Vladimir Tikhomirov +44 20 7826 8237 [email protected] +7 (495) 213 1829 Telecommunications, Media, Technology Oil & Gas Alexander Vengranovich Alexander Burgansky [email protected] [email protected] +7 (495) 213 1830 +7 (495) 213 1825 Tatyana Kalachova Consumer, Real Estate [email protected] Mikhail Terentiev +7 (495) 777 5656 (x114717) [email protected] Roman Odarich +7 (495) 213 1834 [email protected] Tatiana Kormiltseva +7 (495) 777 5656 (x114487) [email protected] +7 (495) 777 5656 (x114560) Financial Services Vladimir Savov Transportation, Industrials [email protected] Irina Stupachenko +7 (495) 213 1826 [email protected] +7 (495) 213 1832 Utilities Denis Ashurkov Sergey Beiden [email protected] [email protected] +7 (495) 777 5656 (x114558) +7 (495) 213 1835