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26 October 2011

Equity Market Daily

Oil & Gas Key indicators TNK-BP International reports solid 3Q11 results; supports dividend Commodities $ chng 1D chng YTD ▪ Brent 1m, $/bbl 111.27 0.3% 17.4% outlook WTI 1m, $/bbl 93.33 0.2% 2.1% Gazprom's draft budget assumes a two-fold dividend increase vs. 2010 Gold, $/oz 1,717 0.7% 20.8% ▪ Silv er, $/oz 33.48 0.7% 8.3% Palladium, $/kg 652 1.4% -18.6% Metals & Mining Platinum, $/oz 1,568 0.1% -11.5% Evraz buys Kachkanar power plant from IES; neutral Nickel LME, $/t 19,750 -1.2% -20.2% ▪ Aluminium, $/t 2,224 0.3% -10.0% TMK sees 3Q11 shipped volumes dip 6% QoQ; neutral Copper, $/t 7,530 -1.4% -21.6% ▪ MMK posts 3Q11 trading update; neutral Currencies chng 1D chng YTD ▪ RUBLE 30.56 -0.22% -0.1% ▪ Polyus Gold International: UK re-domicile and admission to LSE main EURO 1.39 0.03% 3.9% market postponed; negative JAPANESE YEN 75.98 0.16% 6.8% BRITISH POUND 1.60 0.16% 2.7% Telecommunications, Media, Technology Global equity indices chng 1D chng YTD Rostelecom BoD to decide on 31 October regarding buyback RTS 1,501 0.0% -15.2% ▪ MICEX 1,471 0.6% -12.8% ▪ Yandex search engine to be used on Samsung Bada-powered DOW JONES INDUS 11,707 -1.7% 1.1% smartphones S&P 500 1,229 -2.0% -2.3%

NASDAQ COMPOSITE 2,638 -2.3% -0.5% Mail.ru publishes strong 3Q11 trading update NIKKEI 8,748 -0.2% -14.5% ▪ FTSE 100 5,526 -0.4% -6.3% Consumer, Real Estate BSE SENSEX 30 17,255 1.9% -15.9% SHANGHAI SE C 2,443 1.4% -13.0% ▪ Proposed changes to shrinkage taxation; potentially positive for food BRAZIL BOVE 56,286 -1.1% -18.8% retailers ARGENTINA MERVAL 2,851 -0.4% -19.1% Chemicals Best and worst perf. $ chng 1D chng YTD SCOH 4.6 -2.9% -42.3% Uralkali recommends dividends; announces investment programme VFRM 27.2 -2.7% -45.6% ▪ BEGY 1.3 -1.2% -39.6% Industrials, Infrastructure, Small caps TGKE 0.0 -1.2% -53.7% CHZN 2.8 -0.7% -35.6% ▪ Tver Excavator Plant publishes preliminary 3Q11 RAS bottom line NLMK 2.8 -0.4% -41.3% figure CHMF 13.7 0.9% -19.1% ROSB 3.2 1.5% -12.9% ▪ Purpe-Samotlor pipeline costs lowered; neutral for HMS Group OMZZ 1.2 1.7% -23.6% AvtoVAZ posts 1H11 IFRS results Trading volumes, $mn 21.10 24.10 25.10 ▪ MICEX 2,187 2,187 1,614 ▪ Udmurtgeologiya posts preliminary 3Q11 RAS net income RTS 338 356 376

Reports ▪ Magnit: 3Q11 IFRS preview: we expect robust results

Russian indices Events to watch 14 1,790 Date Sector/Company Event 12 1,690 Press release on 3Q11 and 9M11 26 Oct Rosneft 10 1,590 US GAAP Financial Results 1,490 8 24-26 Oct Dixy Group 3Q11 trading update and LFL 1,390 6 Oct Federal Grid Company 1H11 IFRS 1,290 Late October KAMAZ 1H11 IFRS results 4 1,190 Late October Cherkizovo Group 3Q11 trading update 2 1,090 0 990 Oct Magnitogorsk Steel 3Q11 trading update 24-Oct 24-Oct 24-Oct 25-Oct 25-Oct 25-Oct 10:00 13:00 16:00 10:00 13:00 16:00 27 Oct Protek 3Q11 trading update 27 Oct Yandex 3Q11 US GAAP results MICEX vol. RUB bn MICEX index 27 Oct Kazakhmys 3Q11 production report Sources: Bloomberg 27 Oct LUKOIL Board of Directors meeting

* For full version, see Appendix #1

Important information available at http://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer. This investment research is produced by Otkritie Securities Ltd, authorised and regulated by the Financial Services Authority (FSA), and has been prepared by non-US research analysts who are not FINRA registered/qualified as research analysts.

Equity Market Daily | Russia | 26 October 2011

TNK-BP International reports solid 3Q11 results; supports dividend outlook Event: TNK-BP International—the parent company of its listed subsidiary TNK- BP Holding—released its 3Q11 headline results yesterday (25 October). TNK- BP's detailed US GAAP financials along with an MD&A report should be available on 3 November. The reported financial indicators look generally consistent with the tax environment and prevailing 3Q11 market prices. TNK-BP International posted revenues of $15.30bn in 3Q11 (+34% YoY; -1% QoQ), while generating EBITDA of $3.58bn (+40% YoY; +3% QoQ). Net income increased to $2.27bn in 3Q11, rising 8% from the $2.11bn recorded in 2Q11 and 57% from the $1.45bn posted in 3Q10. TNK-BP’s EBITDA and earnings increased in absolute terms vis-a-vis 2Q11, despite revenues that were essentially flat QoQ. According to the company, this was partly due to a $0.3bn gain from MET relief for the depleted Orenburg oil fields booked in 3Q. In addition, TNK-BP posted a one-off gain from the sale of its office building. The company's net debt decreased from $5.27bn at the end of June to $5.08bn at the end of September 2011, in spite of M&A-related expenditures in 3Q11. View: The reported results for TNK-BP International reflect the improved profitability of the group, with strong YoY growth in both earnings and cash flows. In our view, this bodes well for the FY11 dividends of its listed subsidiary, TNK-BP Holding. TNK-BP Holding already approved its interim dividend for 9M11 (RUB3.41/share), and we believe the company could pay a higher dividend for 4Q11 in the middle of 2012. TNK-BP International: 3Q11 US GAAP results

($bn) 3Q10 1Q11 2Q11 3Q11 % chg % chg QoQ YoY

Revenues 11.40 13.82 15.38 15.30 -1% 34% EBITDA 2.56 3.94 3.47 3.58 3% 40% Net income 1.45 2.44 2.11 2.27 8% 57%

Source: company data, Otkritie Capital research

Mitroshin Vadim [email protected]

Gazprom's draft budget assumes a two-fold dividend increase vs. 2010 GAZP RX, Buy, TP $12.40 Event: Vedomosti reported today (26 October) that Gazprom's preliminary budget for 2012 assumes a dividend payment of more than RUB180bn ($5.9bn, based on the current FX rate). This represents almost a two-fold increase on the total dividend payment for last year of RUB91.14bn (RUB3.85/share). The RUB180bn payment implies a RUB7.6 ($0.25) dividend per share ($0.50/ADR), exceeding our current estimate by 24% and translating into a dividend yield of 4.5%. View: In our opinion, the potential two-fold increase in Gazprom's dividend payment reflects a substantial improvement in cash flow generation on the back of higher gas prices and sales volumes. We note that Gazprom forecasts a visible increase in its dividend payment following the upward revisions of its capex guidance for 2012-2014. We believe that Gazprom's ability to distribute a greater proportion of its cash flows with minority shareholders could help improve investor sentiment towards the stock. However, we would emphasize that this draft budget is subject to board approval, hence the actual 2011 dividend proposal could differ from the budgeted parameters. That said, we believe the news is likely to be taken positively by the market.

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Otkritie Capital 2

Equity Market Daily | Russia | 26 October 2011

Valuation and action: We maintain our BUY rating on Gazprom, with a target price of $12.4/share. Mitroshin Vadim [email protected]

Evraz buys Kachkanar power plant from IES; neutral EVR LI, Buy, TP $43.00 Event: According to Bloomberg, Evraz has agreed to buy the Kachkanar power plant from Viktor Vekselberg’s Integrated Energy Systems (IES), in order to continue expanding its iron ore output in the Urals region. The plant is part of Vekselberg’s OAO TGK-9 generating company. The deal is set to close by the end of the year. View: We view the news of this acquisition, which is non-core and for which an acquisition price has yet to be released, as neutral for the share price Evraz. Valuation and action: We maintain our BUY rating on Evraz, with a target price of $43/share. Mantse Robert [email protected]

TMK sees 3Q11 shipped volumes dip 6% QoQ; neutral TRMK, N/R Event: TMK has released its 3Q11 trading update. The company expects to see better operational performance in 4Q11E, which should largely offset the negative impact of its 3Q11 results. TMK management reaffirmed its guidance to increase shipments in FY11E (vis-à-vis FY10). View: We view the results as neutral to slightly positive for the share price since during its 2Q11 financial results conference call the company guided for an 8- 10% QoQ drop in shipments. In 3Q11, virtually all of TMK's major Russian segments saw an expected decline in demand which, together with planned equipment maintenance at the Volzhsky, Seversky and Sinarsky pipe plants, led to a decrease in pipe product shipments vs. 2Q11. Another factor contributing to the reduction in TMK shipments was the significant growth of pipe imports into Russia — this provided competition for TMK products such as seamless OCTG and large diameter pipes/LDPs. At TMK's Russian division, shipments of OCTG declined by 5.9% compared to 2Q11 due to a seasonal slowdown of pipe purchases by oil and gas companies for fields in Western and Eastern Siberia (it is difficult to work there in the wet & muddy summer season). There was also a QoQ drop in LDP shipments in 3Q11 due to the completion of certain Gazprom projects, namely, the Pochinki-Gryazovets pipeline, the first line of Ukhta-Torzhok project, and the second line of the North European Gas Pipeline. Mantse Robert [email protected]

MMK posts 3Q11 trading update; neutral MMK LI, Hold, TP $13.60 Event: MMK has released a 3Q11 trading update, with both crude steel production and finished steel products sales up 13% QoQ. For 3Q11, MMK’s average selling price was $760/t (-6% QoQ), with its average domestic steel price contracting by 9% QoQ. Likewise, its average export price decreased 2% QoQ. For 2011E, the company has confirmed finished steel growth of 10-15% in 2011E (we project YoY growth at ~12%).

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Otkritie Capital 3

Equity Market Daily | Russia | 26 October 2011

View: We view both the production increase (up from a weak 2Q11) and the price decrease (the average selling price was 1%-2% lower than we expected) as mostly expected, and thus mostly priced in. The product mix decreased slightly QoQ, with HVA products sales down 2% QoQ. For the HVA products, plate sales (sold to pipe producers) were off 27% QoQ, which was offset by a 17% QoQ rise in CRC product sales (please see table below). The decrease in thick plate orders was due the postponement to the end of 2011E (and into 2012E) by Gazprom and Transneft of purchases of large-diameter pipes. The average realized price per tonne of Mill 5000 thick plate in 3Q11 declined 16% QoQ due to a decrease in the share of more expensive grades of steel for pipe- makers in the product mix (and a weakening of the ruble against the dollar). On the mining side, production of coking coal concentrate was up 18% QoQ, while iron ore production rose 8% QoQ. Valuation and action: We reiterate our HOLD rating on MMK, with a target price of $13.6/share. Mantse Robert [email protected]

Polyus Gold International: UK re-domicile and admission to LSE main market postponed; negative PLGL LI, Buy, TP $4.90 Event: Polyus Gold has announced that the date of the new UK holding company scheme and the date of admission for trading on the main market are being postponed. The company understands that consideration of its application for consent by the Government Commission on Monitoring Foreign Investment in the Russian Federation under the Strategic Investment Laws of Russia, which is a precondition for the effectiveness of the scheme, has been postponed. The company expects the application to be heard at the next meeting of the Commission. The real question, then, is when the Commission will meet next. Unfortunately, this is not regulated (i.e., there are no set dates), and the Commission does meet regularly (usually at least once a quarter). However, it has met as often as twice in two months. View: We view the news of this delay/postponement as negative for the share price since it introduces an air of uncertainty into a process that was close to completion. Furthermore, a meeting of shareholders has been convened by the Jersey Court at 14:00 on 28 October to approve the scheme. This was to be followed by an EGM of the company to approve the scheme. Once approved, the scheme will remain conditional, waiting for amongst other things the consent of the Commission and on admission to the main market on the LSE. Finally, a Jersey Court hearing to sanction the scheme will be rescheduled. Valuation and action: We maintain our BUY rating, with a target price of $4.9/share. Mantse Robert [email protected]

Rostelecom BoD to decide on 31 October regarding buyback RTKM RX, Sell, TP RUB110.00 Event: Rostelecom announced yesterday (25 October) that on 31 October its Board of Directors will make a decision regarding the buyback of Rostelecom shares. Rostelecom CEO Alexander Provotorov told to journalists yesterday that the company will consider buying back both ordinary and preferred shares. Rostelecom could spend $500mn on the buyback and is ready to buy back ordinary shares at a price of RUB155/share and preferred shares at RUB80/share, Kommersant reported today (26 October).

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Otkritie Capital 4

Equity Market Daily | Russia | 26 October 2011

View: At present, Rostelecom has RUB6.7bn of cash in hand, which is approximately 1.5% of the company’s market cap. Its net debt is around RUB140bn, with a net debt/EBITDA ratio of 1.4x. For Rostelecom to maintain its target net debt/EBITDA ratio below 2.0x, the company has room to borrow no more than RUB60bn in order to finance the buyback, which equals 13.1% of its market cap. The figure of $500mn, circulated by Kommersant, equals approximately 3.5% of Rostelecom’s market cap. Rostelecom has a free float of 47% for ordinary shares and 71.2% for preferred shares. Valuation and action: Rostelecom trades at 2012E EV/EBITDA of 4.9, which is on par with EM peers. Rostelecom was up 7% after the announcement of the BoD meeting yesterday, and closed +3.3%. Vengranovich Alexander [email protected]

Yandex search engine to be used on Samsung Bada-powered smartphones YNDX US, N/R Event: Yandex announced yesterday (25 October) that it has signed a strategic partnership agreement with Samsung. According to the agreement Yandex’s Search will be preinstalled as a default search engine on all Samsung Bada- powered smartphones for the CIS countries. Yandex services for mobile devices will also be integrated into these smartphones. Samsung smartphones with Yandex services will be available for purchase beginning in November. View: We regard the news as positive for Yandex. The agreement with Samsung is a step to counter the decline in Yandex Search’s market share (which dipped another 1% in October). Samsung accounted for 23% of Smartphone sales in Russia in 1Q11, according to Svyaznoy. Bada-powered smartphones currently account for 40% of the company’s smartphone sales in Russia according to Samsung, thus we estimate Bada-powered Samsung smartphones to comprise 9.2% of Russian smartphone sales — Android and iOS smartphones, which both use pre-installed Google Search, together account for 17% of Russian smartphone sales. We expect a further dilution of Yandex’s share of the mobile search market, but that impact on Yandex’s financials could be limited since mobile search is far more poorly monetized than PC and laptop search. Valuation and action: Yandex is trading at a 2012E P/E multiple of 31, which is an 80% premium to EM peers. At present, we do not cover the stock. Vengranovich Alexander [email protected]

Mail.ru publishes strong 3Q11 trading update MAIL LI, Buy, TP $45.00 Event: Mail.ru reported its 3Q11 trading update yesterday (25 October). The company reported $125mn revenue, which came 2% above the consensus ($123mn), but was lower than our forecast ($133mn). Management reiterated its 50% revenue guidance for FY11, as well as an EBITDA margin in the mid- forties. Mail.ru also announced a small ($35mn) buyback of its shares, which will begin today (26 October) and will last through 4Q11. The purpose of the buyback is to cover part of the options for employees and directors granted under the incentive plan implemented along with IPO. One of the minority shareholders of Headhunter exercised his right to exchange his 5.89% in Headhunter into 432,867 ordinary shares of Mail.ru (or roughly, 0.2% of Mail.ru’s total shares). As a result of the exchange, Mail.ru now owns 97.2% of Headhunter.

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Otkritie Capital 5

Equity Market Daily | Russia | 26 October 2011

View: We view the results as very strong. We attribute our 7% miss on top line mainly to our higher estimates for 3Q10, which were not previously reported. Overall, the company even outperformed our forecast in terms of its YoY growth rate (59% vs. 52%), with particularly robust results seen in display advertising, Community IVAS, and other services (mostly related to the Headhunter portal). We think the buyback and news of the Headhunter shares swap are not significant enough to impact the share price. At its post-results conference call, management reaffirmed that Mail.ru is growing in tandem with the market (and in some segments, outpacing the overall market), though it remained cautious about 4Q11, leaving its guidance for 4Q unchanged. Valuation and action: Mail.ru trades on 2012E adjusted P/E multiple of 17, which is in line with global peers. Mail.ru 3Q11 trading update review

% % % 3Q11 3Q11 3Q11 3Q10 2Q11 Difference Revenue, $mn Change, Change actual Consensus Otkritie actual Actual Cons vs YoY QoQ Otkritie Display advertising 34.1 N/A 28.9 21.9 33.4 56% 2% N/A Context advertising 14.4 N/A 19.0 9.5 13.4 52% 7% N/A MMO Games 30.7 N/A 36.6 23.6 31.7 30% -3% N/A Community IVAS 30.0 N/A 22.6 14.3 26.1 110% 15% N/A Other 15.5 N/A 13.0 9.3 13.1 67% 18% N/A Total 125 123 120 79 118 59% 6% 2%

Source: Company data, Otkritie Capital Research, Interfax

Vengranovich Alexander [email protected]

Proposed changes to shrinkage taxation; potentially positive for food retailers Event: RBC Daily reported this morning (26 October) that a few Russian ministries, together with the national retail association, are drafting a bill that would make retailers' inventory losses from shoplifting tax deductible. On our estimates, theft accounts for up to a half of food retailers' inventory shrinkage (or 0.5-1.0% of revenues), meaning that the proposed change to the tax code could noticeably lower the effective tax rate of Russian food retailers. View: According to the article, the bill is to be drafted and submitted to the government by 1 December. However, it is unclear whether the regulation will ever come into force, as the initiative faces strong opposition from the Ministry of Finance, which is concerned by a potential decline in tax revenues. The proposed change to the tax code would have cut budget revenues by RUB30bn in 2010 and 39bn in 2011, according to the Finance Ministry. We would not be surprised if the final version of the bill includes stricter criteria for tax deductions, meaning that only a small portion of losses would ultimately become deductible. Valuation and action: The shrinkage-related tax deductions could be good news for the entire food retail sector, but especially for DIXY, whose FY11 effective tax rate should top 50%. We estimate that the proposed regulatory changes could decrease that effective tax rate to about 30%, boosting our DCF- based target price by 6-8%. For X5, MGNT and OKEY, the valuation impact would be 3-5%, on our estimates. Terentiev Mikhail [email protected]

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Otkritie Capital 6

Equity Market Daily | Russia | 26 October 2011

Uralkali recommends dividends; announces investment programme URKA RX, N/R Event: The Board of Directors of Uralkali has recommended an interim dividend payment in the amount of RUB4/share (dividend yield is 1.5% per ordinary share). The company has also announced a long-term strategic investment programme that includes both brownfield and greenfield expansion. After the merger with Silvinit, Uralkali’s portfolio benefits from substantial brownfield capacity that provides it with the ability to add 4.5mn t of capacity at a very attractive cost. In addition, Uralkali may move forward with the development of both the Ust-Yayvinsky and Polovodovsky greenfield projects, which would provide additional capacity of 5.3mn t. The total investment in Uralkali's expansion programme will amount to $5.8bn by 2021. The weighted average cost of brownfield expansion would be ~$420/t of additional capacity, with a corresponding figure of ~$750/t for greenfield programme. Uralkali emphasized that it expects to finance the strategic investment programme via a combination of free cash flow and loan facilities, whilst staying in line with its announced medium-term goal of keeping a ratio of net debt to LTM EBITDA of 1.0-2.0x. Gabrielik Denis [email protected]

Tver Excavator Plant publishes preliminary 3Q11 RAS bottom line figure TVET RU, N/R Event: Tver Excavator Plant has disclosed a preliminary 3Q11 RAS bottom line figure that reflects a RUB3.4mn loss. This compares to a net loss of RUB14mn posted by the company in 2Q11 (-75% QoQ) and a RUB17.4mn net loss for 3Q10 (-80% YoY). For 9M11, the implied bottom line is for a loss of RUB27.2mn, which is roughly half of the RUB55mn loss recorded for 9M10. Churikov Alexander [email protected]

Purpe-Samotlor pipeline costs lowered; neutral for HMS Group HMSG LI, Buy, TP $11.05 Event: According to Energy Minister Sergei Shmatko, quoted by Interfax yesterday (25 October), Transneft has reduced the cost of building the Purpe- Samotlor pipeline by 15% (from RUB53bn to RUB45bn). Purpe-Samotlor was slated planned in 2012, with pipeline construction beginning in March 2010, though Transneft completed the project earlier. After the launch of a second project, Zapolyarnoye-Purpe, the pipelines could see an expansion from 25mn tons to 50mn tons of oil annually. View: While HMS Group participated in previous stages of the project, and is likely to participate in the expansion of Purpe-Samotlor. This could involve construction of 2 oil pump stations (OPS) by 2017, each with a cost of $15- 40mn (RUB460mn-1,220mn). Given the relatively small size of that project in comparison to the company’s total revenue (which we estimate at ~RUB32bn in 2012). Historically, the share of HMS Group in Transneft’s capex has not exceeded 2-4% of the total, so even a serious decline in Transneft spending on the Purpe-Samotlor project would not have a significant negative impact on the HMS Group’s financials. Moreover, we see the recent decline in steel prices as an opportunity for HMS Group to improve its margins in 2H11, as materials accounted for roughly for 58.5% of its total COGS in 1H11.

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Otkritie Capital 7

Equity Market Daily | Russia | 26 October 2011

Valuation and action: HMS Group trades on a 2012 EV/EBITDA multiple of 2.8 and a 2012 P/E multiple of 4.9, implying discounts to global peers of 55% and 58%, respectively. The stock is substantially down since its IPO, and we see the recent weakness as a buying opportunity. Churikov Alexander [email protected]

AvtoVAZ posts 1H11 IFRS results AVAZ RX, N/R Event: AvtoVAZ published its 1H11 IFRS results yesterday (25 October), revealing 41% YoY revenue growth to RUB82,207mn. Gross profit doubled YoY to RUB10,687mn, with the company reporting an operating profit of RUB11,027mn (vs. RUB7,355mn in 1H10). AvtoVAZ saw significant improvement in its bottom line, posting a net income figure (before non- controlling interest) of RUB6,458mn, which was more than double the corresponding figure of RUB3,034mn recorded for 1H10. View: We see rising demand for AvtoVAZ’s vehicles and YoY growth in the company’s top line as positive, albeit expected (already reflected in published RAS figures) developments. However, operating profit and its bottom line were seriously affected by one-offs such as a government grant on discounting of interest-free loan for RUB11,332mn and a state subsidy of RUB415mn. Excluding these one-offs, the company would show an operational loss of RUB720mn for 1H11. On a more positive note, we would emphasize a decrease in net debt in 1H11 to RUB46,112mn (27% drop YtD), which led to a significant reduction of finance costs (from RUB5,424mn in 1H10 to RUB3,301mn in 1H11). We do not anticipate serious growth in AvtoVAZ’s 2H11 top line in HoH terms. In our view, the next growth period will follow the launching of new models on the Renault platform. Churikov Alexander [email protected]

Udmurtgeologiya posts preliminary 3Q11 RAS net income udmg ru, N/R Event: Udmurtgeologiya has disclosed a preliminary 3Q11 RAS bottom line figure of RUB4.9mn, down 75% QoQ from the net profit of RUB20mn the company posted in 2Q11. On a year-on-year basis, the 3Q11 preliminary results reflect a 61% decline from the RUB12.5mn of net profit recorded for 3Q10. By contrast, the implied figure of RUB24.3mn in net income for 9M11 reveals flat YoY dynamics, coming roughly equal to the RUB24.2mn net profit that the company posted for 9M10. Churikov Alexander [email protected]

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Otkritie Capital 8

Equity Market Daily | Russia | 26 October 2011

Appendix #1. Events to watch

Date Sector Company Event

26 Oct Oil & gas Rosneft Press release on 3Q11 and 9M11 US GAAP Financial Results 24-26 Oct Consumer goods Dixy Group 3Q11 trading update and LFL Oct Electric utilities Federal Grid Company 1H11 IFRS 1H11 IFRS results. Progressive performance on the back Late October Small caps KAMAZ of the truck market recovery Late October Consumer goods Cherkizovo Group 3Q11 trading update Oct Metals & mining Magnitogorsk Steel 3Q11 trading update 27 Oct Consumer goods Protek 3Q11 trading update 27 Oct IT Yandex 3Q11 US GAAP results 27 Oct Metals & mining Kazakhmys 3Q11 production report Board of Directors meeting. The meeting will be held to discuss 27 Oct Oil & gas LUKOIL LUKOIL's actions, directed at increasing shareholder returns. 27 Oct Real estate LSR 3Q11 Trading Update 28 Oct Consumer goods Kernel Annual report for 2011 28 Oct Consumer goods Magnit 3Q11 and 9mo11 IFRS results 28 Oct Consumer goods Pharmstandard 3Q11 trading update and conference call Full 3Q11 and 9M11 US GAAP Financial Statements, MD&A 28 Oct Oil & gas Rosneft and Presentation . The results will be published on the company's website: http://rosneft.ru/Investors/statements_and_presentations/ 31 Oct Real estate Etalon 3Q11 trading update Early November Oil & gas Gazprom 2Q11 IFRS results and conference call November Metals & mining Magnitogorsk Steel 3Q11 IFRS results November Oil & gas Gazprom 3Q11 and 9m11 RAS results November Oil & gas Gazprom Neft 3Q11 and 9m11 US GAAP results November Oil & gas LUKOIL 3Q11 and 9m11 US GAAP results November Oil & gas NOVATEK 3Q11 and 9m11 IFRS results TNK-BP International (parent company) 3Q11 and 9M11 US GAAP 03 Nov Oil & gas TNK-BP Holding full statements and MD&A. The information will be available on the company's web-site: http://tnk-bp.ru/investors/reports/financial/international/ 07-11 Nov Metals & mining Novolipetsk Steel 9M11 consolidated US GAAP results 08 Nov Small caps AEB Russian auto sales statistics for 10M11 09 Nov Consumer goods Baltika 3Q11 IFRS results 09 Nov Media CTC Media 3Q11 US GAAP results 10 Nov Banks Sberbank 10M11 RAS results 10 Nov Consumer goods Astarta 3Q11 IFRS results 10 Nov Consumer goods Rosinter October 2011 trading update 10 Nov Metals & mining ENRC 3Q11 production report and Interim management statement 11 Nov Oil & gas Alliance Oil 3Q11 and 9m11 IFRS results 14 Nov Metals & mining Rusal 3Q and 9m11 IFRS financial results 15 Nov Consumer goods Kalina 3Q11 IFRS results 15 Nov Metals & mining Evraz Group 2nd Interim management statement 17 Nov Consumer goods Myronivsky Hliboproduct 3Q11 IFRS results 23 Nov Telecoms MTS 3Q11 Earnings Release (Projected) 24 Nov Real estate RURIC 3Q11 IFRS results 24-28 Nov Consumer goods Dixy Group October trading update 25 Nov Consumer goods Black Earth Farming 3Q11 IFRS results 28 Nov Consumer goods X5 Retail Group 3Q11 IFRS results 30 Nov Banks Sberbank 3Q11 IFRS results 01 Dec Telecoms Vimpelcom 3Q11 Earnings Release (Projected) 1-6 Dec Consumer goods Dixy Group 3Q11 IFRS results 08 Dec Metals & mining Severstal 3Q11 IFRS results (date TBC) 08 Dec Small caps AEB Russian auto sales statistics for 11M11 12 Dec Consumer goods Rosinter November 2011 trading update 26-28 Dec Consumer goods Dixy Group November trading update 31 Jan Consumer goods Myronivsky Hliboproduct 4Q11 trading update

Sources: company data, Otkritie Capital Research

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Otkritie Capital 9

Equity Market Daily | Russia | 26 October 2011

Appendix #2. Valuations

Company Ticker Currency Last Mcap , Rating Target Upside Free Change 52 week P/E EV/EBITDA* price $mn price float 1D YTD low high 2011E 2012E 2011E 2012E Oil & Gas Gazprom GAZP RX USD 5.51 130,542.7 Buy 12.40 125% 39.0% -1.1% -13.1% 4.57 8.11 2.7 3.2 2.2 2.4 NOVATEK NOTK RX USD 12.74 38,690.2 Hold 14.50 14% 35.0% -1.2% 15.7% 7.92 14.03 21.1 18.9 16.4 14.1 Alliance Oil AOIL SS SEK 86.40 2,258.2 Hold 76.10 -12% 35.9% -0.9% -18.7% 70.00 125.50 6.8 10.1 5.5 6.3 Gazprom Neft SIBN RX USD 4.21 19,962.0 Sell 2.80 -33% 4.3% -0.2% 0.1% 3.48 5.18 5.1 19.2 3.6 7.1 LUKOIL LKOH RX USD 57.59 48,985.9 Buy 69.00 20% 47.6% -1.1% 1.4% 49.19 68.53 3.5 5.2 2.4 3.0 Rosneft ROSN RX USD 6.79 71,963.3 Buy 9.80 44% 15.4% -0.7% -5.3% 5.61 9.06 5.5 9.3 3.6 4.9 Surgutneftegaz SNGS RX USD 0.82 29,275.8 Buy 1.00 22% 82.6% -0.7% -22.5% 0.67 1.19 2.2 3.1 neg. neg. Tatneft TATN3 RX RUB 149.06 11,039.5 Buy 207.38 39% 48.0% 0.9% 1.9% 120.2 199.6 3.0 5.0 2.5 3.4 TNK-BP Holding TNBP RX USD 2.62 39,340.1 Hold 3.00 14% 5.3% -1.2% -1.9% 2.30 3.21 4.7 8.7 3.3 5.2 Transneft TRNFP RX USD 1,563 12,379 Buy 2,809 80% 25.0% -7.9% -29.8% 976 1,660 3.0 3.6 2.7 2.7 Dragon Oil DGO LN GBp 548.00 4,515.8 Hold 549.00 0% 48.0% 1.5% 1.9% 3.9 6.1 8.2 8.9 3.5 3.3 KazMunaiGas EP KMG LI USD 16.80 6,872.5 Buy 26.60 58% 28.0% 1.0% -15.3% 13.1 24.9 3.9 5.6 1.5 1.5 Zhaikmunai ZKM LI USD 8.30 1,535.5 Buy 13.20 59% 32.0% -0.6% -32.5% 6.9 13.6 10.4 4.7 6.3 3.4 VolgaGas VGAS LN GBp 79.50 103.0 Buy 262.00 230% 33.0% -1.9% -1.5% 67.0 156.0 n/m 4.5 20.9 2.8 Max Petroleum MXP LN GBp 14.00 206.8 Buy 25.70 84% 60.0% 0.9% -23.3% 10.0 29.5 n/m n/m 21.6 16.4 Tethys Petroleum TPL CN CAD 0.60 153.8 Buy 1.99 232% 59.0% -6.3% -62.7% 13.5 4.2 3.2 1.0 PetroNeft Resources PTR LN GBp 22.63 158.9 Buy 70.00 209% 58.0% 10.4% -67.9% 17.6 73.5 n/m n/m 31.5 n/m Average 6.7 7.6 8.2 5.2 Financial Services Sberbank SBER RU USD 2.67 59,129.2 Buy 4.00 50% 39.0% -2.4% -21.8% 1.86 3.89 5.8 6.2 1.4 1.2 Vozrozhdenie VZRZ RU USD 24.00 588.1 Hold 30.30 26% 41.0% 4.3% -46.4% 23.00 51.00 11.8 6.6 1.0 0.9 Bank St. Petersburg STBK RU USD 3.50 1,050.5 Buy 4.50 29% 26.3% 67.5% -35.8% 2.09 5.97 5.1 5.1 1.0 0.9 NOMOS Bank NMOS LI USD 10.60 1,959.4 Buy 14.90 41% 25.0% 0.5% -39.4% 8.20 20.52 6.0 5.1 0.9 0.8 Kazkommertsbank KKB LI USD 3.20 1,245.8 Hold 5.20 63% 7.0% 1.6% -46.2% 2.96 8.70 9.1 6.0 0.4 0.4 Halyk Savings Bank HSBK LI USD 5.65 1,537.5 Hold 8.00 42% 20.0% -1.7% -43.8% 5.14 12.58 6.8 4.9 0.9 0.8 Average 7.4 5.7 0.9 0.8 Metals & Mining Norilsk Nickel GMKN RU USD 216.00 41,169.6 Hold 288.00 33% 32.0% 5.4% -7.5% 180.20 278.00 6.5 5.8 4.3 3.7 Evraz EVR LI USD 19.18 8,594.5 Buy 43.00 124% 28.1% -2.1% -46.5% 12.63 42.75 6.3 6.1 4.5 4.3 Magnitogorsk Steel MMK LI USD 6.51 5,598.6 Hold 13.60 109% 12.7% -1.7% -55.3% 4.21 16.61 12.9 6.2 3.8 2.6 Novolipetsk Sleel NLMK LI USD 27.90 16,712.1 Buy 50.50 81% 13.0% -1.2% -41.5% 16.81 51.30 8.0 5.6 6.2 4.6 Severstal SVST LI USD 13.63 13,735.0 Buy 24.00 76% 18.0% -0.3% -19.1% 9.43 20.30 6.7 5.7 4.0 3.6 Mechel MTL US USD 12.37 5,145.9 Buy 16.60 34% 28.0% -5.0% -57.7% 8.34 34.74 6.7 6.4 4.8 4.8 Raspadskaya RASP RU USD 2.83 2,209.7 Buy 3.48 23% 18.0% 2.9% -59.7% 2.40 8.15 10.2 8.7 6.5 5.3 Highland Gold Mining HGM LN USD 3.04 988.7 Hold 3.30 9% 33.0% 3.3% 2.4% 2.30 3.47 9.4 10.3 5.0 5.2 High River Gold HRG CN CAD 1.40 1,176.3 Buy 1.40 0% 27.4% 3.7% 13.8% 0.01 0.02 9.1 10.1 3.9 3.9 Petropavlovsk POG LN USD 12.18 2,217.1 Buy 18.57 52% 72.0% -0.8% -33.5% 8.61 18.83 6.8 5.4 4.7 4.0 Polymetal PMTL LI USD 16.47 5,900.2 Buy 24.93 51% 37.0% 1.0% -10.0% 14.07 22.49 9.5 8.3 6.5 5.0 Polyus Gold PLZL LI USD 30.50 11,628.3 Buy 43.58 43% 21.0% 1.2% -15.9% 25.50 39.01 15.0 11.0 10.0 7.1 Chelyabinsk Zinc Plant CHZN RM USD 2.85 154.3 Hold 5.50 93% 42.0% -1.2% -35.6% 2.44 5.53 3.0 3.6 1.1 0.7 Gaiskiy GOK GGOK RU USD 475.00 293.4 Buy 737.00 55% 15.0% 354.40 562.00 2.3 2.2 2.1 1.5 ENRC ENRC LN GBp 676.50 13,939.5 Buy 1240.00 83% 18.2% -1.2% -35.4% 509.00 1,127 5.8 5.0 3.7 3.0 Ferrexpo FXPO LN GBp 307.80 2,899.0 Hold 440.00 43% 11.0% -0.8% -26.0% 237.40 522.50 4.6 4.2 3.5 2.8 IRC 1029 HK HKD 1.14 493.0 Hold 1.72 51% 25.0% 2.6% -17.6% 0.91 2.52 27.2 14.6 11.1 9.3 Uchalinskiy GOK UGOK RU USD 12.30 468.4 Hold 13.90 13% 11.0% -3.3% 2.6% 9.75 13.80 2.8 2.5 1.8 1.7 UC RUSAL 486 HK HKD 6.91 13,503.0 Buy 12.28 78% 11.0% -0.7% -42.4% 5.90 14.10 6.3 5.8 9.0 8.3 Average 8.4 6.7 5.1 4.3 Telecommunications MTS MBT US USD 14.21 14,330.8 Buy 21.50 51% 46.7% -0.4% -31.9% 11.41 23.50 8.8 7.7 4.0 3.9 Vimpelcom Ltd VIP US USD 10.92 17,779.9 Buy 22.00 101% 21.2% -1.7% -27.4% 8.83 16.38 8.4 6.9 3.3 3.7 Rostelecom RTKM RM RUB 152.44 13,390.5 Sell 110.00 -28% 45.0% 3.1% -2.7% 102.00 252.00 10.4 9.9 4.5 4.2 Average 9.2 8.2 4.0 3.9 Media ITE Group ITE LN GBP 176.50 701.3 Buy 300.00 70% 100.0% -0.3% -30.0% 155.00 261.40 12.6 11.8 8.2 7.6 CTC Media CTCM US USD 11.07 1,725.5 Buy 20.00 81% 37.0% -7.8% -51.2% 8.04 24.37 9.8 8.6 5.8 5.4 Mail.ru MAIL LI USD 33.21 6,962.4 Buy 45.00 36% 28.8% -0.6% -7.8% 23.44 45.00 38.3 25.8 15.7 10.4 Average 20.2 15.4 9.9 7.8 Technology IBS Group IBSG GR USD 21.68 497.7 Hold 33.00 52% 35.0% -1.4% -18.8% 16.45 33.38 16.4 11.6 7.8 5.4 Average 16.4 11.6 7.8 5.4

* P/BV for banks Sources: Bloomberg, Otkritie Capital Research

Important information available at http://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.

Otkritie Capital 10

Equity Market Daily | Russia | 26 October 2011

Appendix #2. Valuations

Company Ticker Currency Last Mcap , Rating Target Upside Free Change 52 week P/E EV/EBITDA* price $mn price float 1D YTD low high 2011E 2012E 2011E 2012E Utilities RusHydro HYDR RM RUB 1.10 10,498.5 Buy 1.90 72% 35.0% -0.7% -33.0% 1.01 1.77 8.5 13.2 5.1 6.5 OGK-1 OGK1 RM RUB 0.73 1,065.5 Buy 1.02 40% 30.0% -3.6% -40.0% 0.56 1.27 6.9 10.1 1.7 3.2 OGK-2 OGK2 RM RUB 0.94 1,003.7 Buy 1.62 73% 35.0% -2.4% -47.9% 0.80 1.90 12.6 6.8 7.0 5.4 OGK-3 OGKC RM RUB 0.94 1,468.2 Buy 1.59 68% 20.0% -3.0% -44.9% 0.80 1.79 41.1 15.4 12.9 4.6 OGK-4 OGK4 RM RUB 2.29 4,735.4 Buy 3.25 42% 20.0% -2.0% -22.2% 1.94 3.35 9.3 7.2 6.2 4.3 OGK-5 OGKE RM RUB 1.88 2,185.8 Buy 2.87 52% 20.0% -3.1% -33.0% 1.72 3.03 7.3 6.6 5.7 5.1 OGK-6 OGK6 RM RUB 0.77 819.2 Buy 1.16 50% 35.0% -2.0% -46.3% 0.65 1.65 5.8 3.1 4.1 2.9 TGK-1 TGKA RM RUB 0.01 1,313.0 Buy 0.0220 112% 22.5% -1.0% -51.7% 0.01 0.02 4.8 4.2 3.9 3.7 TGK-2 TGKB RM RUB 0.00 181.7 Hold 0.0044 16% 22.0% 0.0% -54.6% 0.00 0.01 n/m n/m 9.8 10.2 MSNG RM RUB 1.91 2,483.5 Buy 3.4972 84% 20.0% -0.8% -40.9% 1.74 3.35 6.2 7.2 2.7 3.0 TGK-4 TGKD RM RUB 0.01 551.9 Hold 0.0092 4% 20.0% -2.0% -45.0% 0.01 0.02 10.4 4.2 3.8 2.7 TGK-5 TGKE RM RUB 0.01 342.9 Hold 0.0093 10% 30.0% -1.2% -53.7% 0.01 0.02 n/m n/m 10.2 17.5 TGK-6 TGKF RM RUB 0.01 493.9 Hold 0.0090 10% 10.0% 0.0% -52.3% 0.01 0.02 11.4 19.2 5.3 6.5 TGK-7 VTGK RM RUB 2.15 2,113.8 Hold 1.9603 -9% 25.0% -0.7% -5.0% 1.71 2.52 16.1 12.8 7.4 6.0 TGK-9 TGKI RM RUB 0.00 750.4 Hold 0.0031 8% 20.0% -1.0% -39.3% 0.00 0.01 9.0 n/m 6.1 8.9 TGK-10 TGKJ RM RUB 29.24 844.2 Buy 45.00 54% 2.0% -0.9% -37.5% 27.07 60.61 4.2 3.1 3.6 3.2 TGK-11 TGKK RM RUB 0.01 146.3 Hold 0.0080 -8% 10.0% -4.4% -54.8% 0.01 0.02 6.0 12.0 3.5 4.5 KZBN RM RUB 0.27 618.5 Sell 0.2019 -24% 20.0% -0.6% -33.8% 0.22 0.41 n/m n/m 8.3 10.9 TGK-13 TGK13 RM RUB 0.08 403.4 Buy 0.1004 30% 20.0% -1.7% -41.3% 0.07 0.14 n/m n/m 8.8 5.9 TGK-14 TGKN RM RUB 0.0020 87.1 Buy 0.0023 19% 20.0% 0.3% -53.3% 0.00 0.00 2.9 3.0 2.2 2.2 INTER RAO IUES RM RUB 0.04 3,424.9 Buy 0.0416 15% 27.0% -2.2% -24.6% 0.02 0.07 0.0 0.0 1.6 1.7 Federal Grid Company FEES RM RUB 0.27 11,074.4 Buy 0.4800 78% 20.0% -2.7% -26.7% 0.21 0.50 8.6 6.5 4.6 3.8 MOESK MSRS RX RUB 1.52 2,429.2 Hold 1.4268 -6% 32.0% 0.1% -8.8% 1.27 1.85 6.5 14.4 3.7 5.2 Lenenergo LSNG RX RUB 12.55 415.6 Buy 14.22 13% 7.3% -1.6% -51.7% 10.81 29.58 8.2 n/m 3.5 5.2 MRSK Center MRKC RX RUB 0.76 1,047.7 Buy 1.1111 47% 30.0% -0.1% -43.9% 0.68 1.54 5.2 5.1 3.3 3.3 MRSK North-West MRKZ RX RUB 0.10 305.3 Hold 0.0984 1% 45.0% -2.1% -57.1% 0.08 0.24 n/m n/m 4.5 6.8 MRSK Center&Volga MRKP RX RUB 0.17 634.1 Hold 0.1663 -3% 32.0% -0.8% -43.4% 0.14 0.35 10.6 11.2 4.3 4.7 MRSK Urals MRKU RX RUB 0.19 550.7 Buy 0.2349 22% 28.0% -1.5% -42.9% 0.15 0.36 3.9 5.4 2.4 3.1 MRSK Volga MRKV RX RUB 0.09 534.0 Buy 0.1321 45% 32.0% -0.7% -49.3% 0.07 0.19 11.7 n/m 4.2 8.7 MRSK Siberia MRKS RX RUB 0.15 452.2 Hold 0.1429 -7% 18.0% 2.8% -49.7% 0.13 0.36 n/m n/m 6.7 11.5 MRSK South MRKA RX RUB 0.08 138.3 Buy 0.1057 25% 26.0% -0.7% -52.8% 0.07 0.22 6.6 7.7 3.2 3.4 MRSK Northern Caucasus MRKK RX RUB 68.68 66.5 Buy 89.59 30% 42.0% -2.0% -61.1% 61.66 201.09 11.3 n/m 2.7 4.4 MRSKs Holding MRKH RM RUB 2.60 3,501.7 Buy 4.0400 55% 30.5% -3.1% -51.5% 1.70 6.00 3.3 2.2 1.9 1.6 Average 8.8 7.9 5.0 5.5 Consumer Dixy Group DIXY RU USD 8.82 1,100.3 Buy 16.40 86% 38.0% 25.5% -32.7% 7.03 15.20 n/m n/m 6.6 6.3 Magnit MGNT LI USD 23.00 10,222.5 Buy 31.70 38% 48.3% -1.2% -21.5% 16.79 32.41 34.2 27.0 13.6 10.8 X5 Retail Group FIVE LI USD 27.36 7,421.6 Buy 46.00 68% 30.3% 1.3% -40.8% 21.07 48.00 n/m 33.6 11.7 9.0 Okey OKEY LI USD 5.90 1,587.5 Buy 11.60 97% 14.5% 6.3% -57.2% 5.04 15.00 31.0 25.8 7.3 6.3 Average 32.6 28.8 9.8 8.1 Industrials HMS Group HMSG LI USD 4.20 492.1 Buy 11.05 163% 37.2% -4.5% - - - 5.7 4.8 3.6 2.9 Average 5.7 4.8 3.6 2.9

* P/BV for banks Sources: Bloomberg, Otkritie Capital Research

Important information available at http://research.otkritie.com is accessible via hyperlink: Disclosures & Disclaimer.

Otkritie Capital 11