Jul 27, 2012 ... designed to promote the independence of investment research. ... competing with
its foreign peers on the Russian tyre market for several years.
27 July 2012
EQUITY RESEARCH AUTOMAKERS
NOKIAN TYRES Tired of Russian Companies?
BUY 12M Target price Upside potential
EUR43.1 40%
Bloomberg code
NRE1V FH
Reuters code
NRE1V.HE
Price (EUR)
30.7
Share data No. of ordinary shares (mn)
131
Daily t/o (EURmn)
26.6
Free float (%)
81%
Market capitalisation (EURmn)
4,051
Enterprise value (EURmn)
3,944
Major shareholders Bridgestone Europe
15.2%
Varma Pension Fund
3.9%
FINANCIALS (EURmn)
2012E
2013E
2014E
Revenue
1,648
1,805
1,958
EBITDA
523
566
634
Net income
361
386
429
EPS ($)
2.7
2.9
3.3
DPS ($)
1.0
1.0
1.1
P/E (x)
11.2
10.5
9.4
EV/EBITDA (x)
7.6
7.0
6.3
EV/Sales (x)
2.4
2.2
2.0
P/B (x)
2.9
2.4
2.1
VALUATION
PERFORMANCE 1 month
13%
3 month
-14%
12 month
-12%
52-week high (EUR)
38.2
52-week low (EUR)
19.2
With this report we initiate coverage of Finnish tyre producer Nokian Renkaat (Nokian Tyres), which we rate as a BUY with a 12-month target price of EUR43.1/share. This implies a healthy 40% upside potential. We believe the company presents a unique combination of high corporate governance standards, sound fundamentals and direct exposure to Russia, which could soon be Europe’s largest car market. BUY Nokian Tyres. Headquartered in Finland, Nokian Tyres has been successfully competing with its foreign peers on the Russian tyre market for several years. Famous for its winter tyres, Nokian is the brand of choice for many premium car owners who must navigate Russia’s rough icy roads during its harsh winters. In a country where temperatures sink below zero for five months of the year, proper winter tyres are the second-most important factor in road safety, with the first being common sense (which cannot be legislated in Russia). Direct exposure to the Russian auto market. We believe that Nokian Tyres is uniquely positioned to capitalise on the expanding Russian automobile market. Compared to the listed Russian automakers – Sollers, AvtoVAZ, GAZ Group and KAMAZ – Nokian Tyres boasts better stock liquidity and superior corporate governance. The company’s investment case is solidly backed by its Russia-based production plant which commanded an operating capacity of 11mn tyres per year in 2011 (60% of which are exported). Russia has become an important market. The share of Nokian’s revenue from tyre sales in Russia grew from 15% in 2004 to over 27% in 2011. We forecast that in the next five years, Russia should account for almost 50% of the company’s revenue. Given that more than half of all tyres produced at Nokian’s Vsevolzhsk plant are exported, Russia has become a very important centre for the company’s operations. A less cyclical business. The tyre market is less sensitive to economic downturns as it is largely driven by the replacement factor. While new passenger car sales in Russia more than halved in 2009 vs 2008, new tyre sales declined only 36% YoY. In addition, the financial performance of Nokian’s 100%-owned Russian subsidiary, LLC Nokian Shina, after the 2008-09 crisis was close to astonishing. While 2009 revenue fell 20% YoY to EUR360mn, the following two years were marked by record-high revenues: EUR450mn in 2010 (+55% YoY) and EUR665mn in 2011 (+48% YoY). In 2007-11, Nokian Shina’s net profit grew from EUR62.2mn to EUR181.8mn. Russia is Europe’s second-largest car market. With European auto sales showing negative dynamics, Russia has matured into the region’s second-largest car market, right behind Germany. As foreign automakers reduce or close production in Europe, their focus has been turning to emerging markets. Increasing competition. We believe that increasing competition with foreign brands is by far the most significant risk for Nokian Tyres in Russia. With Pirelli, Continental and Michelin expanding their production in Russia, Nokian will need to invest more in marketing to retain its market share, in our view.
Source: Bloomberg Note: Prices as of close 26 July 2012 throughout the report MIKHAIL PAK 7 (495) 213 0337
[email protected] NIKITA MELNIKOV 7 (495) 213 0336
[email protected]
For professional investors only. This document has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Please refer to important disclosures and analyst certification at the end of this document
Contents Investment Summary .................................................................................................... 3 Valuation ................................................................................................................. 4 Why Buy? ................................................................................................................. 9 Major Concerns ..................................................................................................... 10 Market Overview......................................................................................................... 11 The Russian Car Market – In Pole Position ............................................................ 11 Russia’s Tyre Market – Preparing for Changes ...................................................... 14 Key Market Players ................................................................................................ 15 Nokian Tyres – Winter is Coming ................................................................................ 17 Company Overview ............................................................................................... 17 Corporate Governance ................................................................................................ 22 Nokian Tyres: Snapshot ............................................................................................... 24 Financial Statements ................................................................................................... 25
2
Investment Summary With this report we initiate coverage of Finnish tyre producer Nokian Renkaat (Nokian Tyres) which we rate as a BUY, and set a 12-month target price of EUR43.1/share. This implies a healthy 40% upside potential. Russia’s automobile market continues to demonstrate stable growth driven largely by an increase in disposable incomes and the availability of various consumer credit facilities. It has become Europe’s second-largest market with 272,125 new cars sold in June 2012 (Germany is first with 297,772 cars registered in the same period). While in Germany, the number of cars per 1,000 people is well above 500, similar data for Russia – 257 cars per 1,000 in 2011 – suggests that the market is far from mature, and we forecast it to grow at a CAGR of 7.0% over the next six years Nevertheless, we believe that many Russia-dedicated investment funds remain on the sidelines of the country’s auto market due to the lack investable stocks. Among the major factors which restrict their exposure to the sector, we note the low liquidity and low corporate governance standards of Russian car producers. However, there is a company which we believe could be regarded as an interesting alternative to listed Russian car producers. Finnish in origin, Nokian Renkaat has been becoming more Russian of late: its share of revenue from tyre sales in Russia has grown from 15% in 2004 to over 40% in 1Q12. We forecast that within five years, Russia should account for almost half of the company’s revenue. Given that more than 50% all tyres produced at Nokian’s Vsevolzhsk plant in Leningrad region are exported, Russia has become a very important centre for the company’s operations. We initiate coverage of Nokian Renkaat with a BUY rating and a 12-month target price of EUR43.1/share which implies a robust 40% upside potential. Figure 1: Rating summary
Nokian Renkaat
3
Current price (EUR) 30.7
Target price (EUR) 43.1
Up/downside potential 40%
Rating BUY Source: Aton estimates
Valuation We used a DCF model as our preferred approach to value the company. In addition, we provide a peer group comparison to see how the market values Nokian Tyres vs its listed peers. We have built our investment case for Nokian Tyres around its exposure to Russia. We believe it is appropriate to use the same risk-free assumptions we use to value Russian companies. Our WACC estimates are provided below. Figure 2: WACC estimates Cost of equity estimate Component
Risk premium
Risk free rate
4.5%
Standard equity risk premium
4.0%
Country-specific equity premium Base cost of equity Further adjustments Liquidity risk premium Other company-specific risk premiums Total CoE Cost of debt estimate
4.0% 12.5%
Comment Based on expected 12M YTM for 30y US Treasury bonds Historic difference in returns of US stocks and bonds CDS * (volatility of RTS/volatility of S&P)
0.5% 0.5% 13.4% Risk premium 17.0% 3.5% 2.9%
Component Effective tax rate Current CoD CoD after tax WACC
Comment
Risk premium
Component Target capital structure Equity Debt WACC
Comment
70% 30% 10.3% Source: Bloomberg, Aton estimates
We believe that a terminal growth rate of 1.5% is a good description of the long-term prospects of Nokian Tyres given its exposure not only to Russia but to more mature Western markets, as well.
Figure 3: Aton vs Bloomberg consensus (EURmn) Aton estimates Revenue EBITDA Net profit
Bloomberg consensus
Difference (%)
2012E
2013E
2014E
2012E
2013E
2014E
2012E
2013E
2014E
1,648 523 361
1,805 566 386
1,958 634 429
1,734 571 399
1,948 638 445
2,162 694 487
-5.0% -8.4% -9.3%
-7.4% -11.3% -13.2%
-9.5% -8.7% -12.0%
Source: Bloomberg, Aton estimates
4
Figure 4: DCF model (EURmn) Operating profit Less tax NOPLAT +DD&A -Capex -Ch. In WC FCF DCFs TV EV Net debt and minority interest Target equity value Shares outstanding ('000s) Target price (EUR) Current price (EUR) Upside/(Downside) Implied multiples (x) EV/EBITDA P/E EV/S
2012E 447 -76 371 76 -193 -57 198 1,552 8,871 5,615 -68 5,683 131,863 43.1 30.7 40.3%
2013E 474 -81 394 91 -216 -87 183
2014E 526 -89 436 108 -221 -64 260
2015E 546 -93 453 124 -235 -72 269
2016E 605 -103 502 139 -256 -89 297
2017E 664 -113 552 157 -259 -59 390
2018E 746 -127 619 171 -287 -72 430
10.7 15.7 3.4
9.9 14.7 3.1
8.9 13.3 2.9
8.4 12.7 2.7
7.6 11.5 2.5
6.8 10.4 2.3
6.1 9.3 2.0
2019E 835 -142 693 185 -322 -56 500
CAGR 10.3% 13.0% 9.8% 12.6% 9.0% -13.1% 29.1%
5.5 8.3 1.9 Source: Aton estimates
Figure 5: Target price sensitivity analysis (EUR/share) 45 0.5% 1.0% 1.5% 2.0% 2.5%
9.3% 46.0 48.0 50.2 52.8 55.8
9.8% 42.8 44.5 46.4 48.6 51.1
10.3% 39.9 41.4 43.1 45.0 47.1
10.8% 11.3% 37.4 35.1 38.7 36.3 40.1 37.5 41.8 38.9 43.6 40.5 Source: Aton estimates
Figure 6: Target price upside/downside sensitivity analysis 45 0.5% 1.0% 1.5% 2.0% 2.5%
5
9.3% 50% 56% 64% 72% 82%
9.8% 39% 45% 51% 58% 66%
10.3% 30% 35% 40% 46% 53%
10.8% 11.3% 22% 14% 26% 18% 31% 22% 36% 27% 42% 32% Source: Aton estimates
Figure 7: International peer group comparison (EURmn) Company Country MktCap EV P/E 2012E 2013E 2014E EV/EBITDA 2012E 2013E 2014E P/S 2012E 2013E 2014E
Peers' weighted average
FINLAND 4,051 3,982
Nokian Renkaat (implied) FINLAND 5,683 5,615
11.2 10.5 9.4
15.7 14.7 13.3
7.6 7.0 6.3 2.5 2.2 2.1
Nokian Renkaat
Brisa Bridgestone TURKEY 766 959
Goodyear
Pirelli
UNITED STATES 1,969 6,007
ITALY 3,704 4,804
Sumitomo Rubber JAPAN 2,558 5,332
8.6 7.4 6.4
24.7 19.0 16.7
4.7 3.5 3.0
8.1 6.8 5.7
10.7 9.9 8.9
5.1 4.5 4.1
12.4 10.2 8.9
3.8 3.3 2.8
3.4 3.1 2.9
0.6 0.5 0.5
1.1 1.0 0.9
0.1 0.1 0.1
Yokohama
Hankook Tire
Nexen Tire
Kumho Tire
JAPAN 1,917 3,382
SOUTH KOREA 4,494 4,861
SOUTH KOREA 1,352 1,765
SOUTH KOREA 1,334 2,524
6.8 6.3 5.8
6.6 6.4 5.8
8.7 8.3 7.4
12.5 9.8 8.1
8.2 5.8 4.7
4.4 3.8 3.4
5.0 4.7 4.4
4.6 4.3 3.9
4.9 4.6 4.3
9.0 7.3 6.3
5.5 4.7 4.1
0.6 0.5 0.5
0.3 0.3 0.3
0.3 0.3 0.3
0.9 0.8 0.7
1.1 0.9 0.8
0.4 0.4 0.4
Source: Bloomberg, Aton estimates
Figure 8: Russian peer group comparison (EURmn) Company Country MktCap EV P/E 2012E 2013E 2014E EV/EBITDA 2012E 2013E 2014E P/S 2012E 2013E 2014E
FINLAND 4,051 3,982
Nokian Renkaat (implied) FINLAND 5,683 5,615
11.2 10.5 9.4
15.7 14.7 13.3
6.8 7.0 5.1
8.2 8.3 6.5
5.2 4.2 2.9
8.3 9.4 6.2
2.5 2.3 2.1
7.6 7.0 6.3
10.7 9.9 8.9
4.8 5.4 4.3
5.7 7.1 5.4
5.0 4.9 4.5
4.7 4.9 3.6
3.4 3.2 2.8
2.5 2.2 2.1
3.4 3.1 2.9
0.2 0.2 0.2
0.2 0.2 0.1
0.2 0.2 0.2
0.2 0.2 0.2
Nokian Renkaat
6
Peers' weighted average
AvtoVAZ
Sollers
Kamaz
GAZ Group
RUSSIA 742 2,145
RUSSIA 357 861
RUSSIA 752 1,074
RUSSIA 386 1,252
0.1 0.1 0.1 Source: Bloomberg, Aton estimates
Figure 9: International peer group comparison (EURmn) Company Financials Revenue 2011 2012E 2013E 2014E EBITDA 2011 2012E 2013E 2014E Net profit 2011 2012E 2013E 2014E CAGR 2011-14E Revenue EBITDA Net profit Net debt/EBITDA Profitability EBITDA margin 2011 2012E 2013E 2014E Net margin 2011 2012E 2013E 2014E
Nokian Renkaat
Brisa Bridgestone
Goodyear
Pirelli
Sumitomo Rubber
Yokohama
Hankook Tire
Nexen Tire
Kumho Tire
1,457 1,648 1,805 1,958
605 694 778 848
18,525 18,906 19,745 21,786
5,655 6,348 6,927 7,474
7,040 7,379 7,654 8,020
5,406 6,079 6,329 6,605
2,825 5,090 5,546 6,072
841 1,261 1,482 1,694
2,319 3,163 3,427 3,740
452 523 566 634
71 78 94 107
1,496 1,596 1,811 2,131
813 1,084 1,261 1,422
952 1,059 1,130 1,198
576 735 789 863
328 988 1,061 1,141
98 196 240 281
242 462 542 610
309 361 386 429
32 31 40 46
279 422 556 652
452 458 549 644
295 375 404 441
145 288 301 332
191 519 544 605
65 109 138 167
76 163 229 283
10% 12% 12% -0.1
12% 15% 13% 2.5
6% 13% 33% 2.5
10% 20% 13% 1.0
4% 8% 14% 2.6
7% 14% 32% 2.0
29% 52% 47% 0.4
26% 42% 37% 2.1
17% 36% 55% 2.6
31% 32% 31% 32%
12% 11% 12% 13%
8% 8% 9% 10%
14% 17% 18% 19%
14% 14% 15% 15%
11% 12% 12% 13%
12% 19% 19% 19%
12% 16% 16% 17%
10% 15% 16% 16%
21% 22% 21% 22%
5% 4% 5% 5%
2% 2% 3% 3%
8% 7% 8% 9%
4% 5% 5% 6%
3% 5% 5% 5%
7% 10% 10% 10%
8% 3% 9% 5% 9% 7% 10% 8% Source: Bloomberg, Aton estimates
7
Figure 10: Comparison with Russian automaker peers (EURmn) Nokian Renkaat
AvtoVAZ
Sollers
Kamaz
GAZ Group
2011
1,457
4,402
1,748
2,686
3,330
2012E
1,648
4,422
1,713
3,060
3,652
2013E
1,805
4,767
1,767
3,336
3,960
2014E
1,958
5,217
1,910
3,647
4,245
2011
452
516
255
155
347
2012E
523
378
172
230
368
2013E
566
301
177
220
396
2014E
634
394
192
299
453
2011
309
171
116
45
206
2012E
361
90
68
90
155
2013E
386
89
84
80
167
2014E
429
114
122
122
180
Revenue
10%
6%
3%
11%
8%
EBITDA
12%
-9%
-9%
24%
9%
Net profit
12%
-13%
2%
40%
-4%
Net debt/EBITDA
-0.1
3.7
2.9
1.4
2.4
2011
31%
12%
15%
6%
10%
2012E
32%
9%
10%
8%
10%
2013E
31%
6%
10%
7%
10%
2014E
32%
8%
10%
8%
11%
2011
21%
4%
7%
2%
6%
2012E
22%
2%
4%
3%
4%
2013E
21%
2%
5%
2%
4%
2014E
22%
2%
6%
3%
4%
Company Financials Revenue
EBITDA
Net profit
CAGR 2011-14E
Profitability EBITDA margin
Net margin
Source: Bloomberg, Aton estimates
8
Why Buy? Exposure to Europe’s soon-to-be largest auto market. New car sales in Russia have been growing at a CAGR of 10.0% over the last 10 years, while the EU’s passenger car market has shown a negative compound annual decline of 1.4% over the same period. Car density in Russia remains below the levels seen in the EU – 257 cars per 1,000 capita vs 540 in the EU. Strong foothold in Russia. Nokian Tyres is a widely recognised brand in Russia and its products (Hakkapeliitta, Nordman) have a good reputation. Nokian operates its own plant in Vsevolzhsk, where production capacity is set to grow from 11mn tyres in FY11 to 17mn by 2015 (for comparison, annual production capacity at Nokian’s Finland plant is 7mn tyres a year). The company is the only global producer with a controlled local tyre distribution network, which is comprised of 498 Vianor stores in Russia and the CIS. A less cyclical market. The tyre market is less sensitive to economic downturns as it is largely driven by the replacement factor. While new passenger car sales in Russia more than halved in 2009 vs 2008, new tyre sales declined only 36% YoY. We also note that Nokian’s 100%-owned Russian subsidiary, LLC Nokian Shina, saw its revenues decline by 20% in the crisis year of 2009 from EUR360mn to EUR290mn. The following two years were marked by record-high revenues for Nokian Shina: EUR448.4mn in 2010 (+55% YoY) and EUR665.7mn in 2011 (+48% YoY). In 2007-11, Nokian Shina’s net profit grew from EUR62.2mn to EUR181.8mn. Strong financial profile. We believe that Nokian Tyres’ balance sheet is strong enough to weather any potential economic downturn either in Russia or abroad. As of 2011, Nokian had a net cash position of EUR4mn and its total debt/EBITDA ratio was a notch above 1x (this compares with the average of 2.7x among listed Russian auto producers). The company’s profitability levels are above the industry average due to its strong foothold in the winter tyre market (this type carries a price premium of 15-30% over summer tyres), as well as access to cheap labour in Russia. In 2011 EBITDA margin stood at 31% vs 11% for its peers. Good stock liquidity. Nokian’s daily traded value over the last six months has averaged EUR26.6mn – more than 30x the combined traded value of Sollers, KAMAZ, AvtoVAZ and GAZ Group. Nokian is a member of 87 indices including STOXX Europe 600, while none of the listed Russian automakers is a member of the most active domestic indices, the RTS and MICEX, let alone MSCI Russia. High corporate governance standards. While some Russian auto-sector companies – namely GAZ Group and Sollers – are striving to improve their corporate governance practices, we believe they are still well behind Nokian. In terms of disclosure level, board of directors’ composition, ownership structure, and the transparency of decision-making processes, Nokian Tyres is well ahead of Russia’s automakers.
9
Major Concerns Increasing competition. With developed markets showing signs of stagnation, a number of foreign tyre producers have turned their eyes to Russia.
In Nov 2011 Continental AG (brands include Continental, Gislayed, Matador and Barum) started to build its own EUR200mn plant in Kaluga region which is scheduled to produce 4mn tyres a year by late 2013 (with long-term plans to double capacity). In 2011 Italy’s Pirelli together with Russian Technologies paid EUR222mn for the Voronezh and Kirov Tyre plants. The partners plan to invest EUR200mn to increase the plants’ combined production capacity from 8.5mn tyres to 10.5mn by 2015. Japan’s Yokohama opened a plant in Russia’s Lipetsk region in May 2012. Initially, the EUR125mn plant will produce 1.4mn tyres/year, with further expansion to 3-4mn tyres planned at a cost of EUR175mn. France’s Michelin owns a 2mn tyre/year plant in Moscow region and is mulling the launch of a capacity expansion programme.
WTO. Imported tyres accounted for over 45% of Russian market sales in 2011. Following Russia’s entry to the World Trade Organisation on 23 Aug, import duties on passenger car tyres are set to decline from the current 20% to 10% by 2017. We expect declining import duties to lead to increased competition on the tyre market. Cost inflation. While high oil prices are widely perceived as beneficial for the overall Russian economy, tyre producers find themselves at the receiving end as synthetic polymers account for over 30% of raw material costs. Another important cost component is natural rubber (30%). Neither Russia nor Finland boasts any significant reserves of natural rubber, while the Asia-Pacific region accounts for over 90% of the world’s supply. Clearly, any potential increase in feedstock prices would damage profitability as rising competition could restrict Nokian’s ability to transfer higher costs onto consumers. Throughout this report we argue that Russia’s car market is far from mature and we expect future growth to be driven largely by rising disposable incomes and the availability of various consumer credit schemes.
1 0
Market Overview The Russian tyre market has been growing at a CAGR of 6.4% over the last 10 years, reaching 55.5mn tyres in 2011. New car sales for the same period rose 10.0% per year (2.6mn vehicle sold in 2011), boosting Russia’s auto fleet to 35.6mn by late 2011. We believe that unlike the EU market, Russia’s auto market still has considerable room for growth. With an average car age of 12.3 years and a density of only 257 cars per 1,000 people, we forecast new car sales will rise at a CAGR of 7.0% over the next six years, providing a strong foundation for Russia’s tyre market.
The Russian Car Market – In Pole Position In 1994-2008, new passenger car sales in Russia grew at a CAGR of 12.2%, peaking in 2008 with 2.9mn autos sold. The primarily reasons for strong demand, we believe, were rising per capita incomes (stemming from high oil prices which drove economic growth) and the rapid increase in the availability of car loans. In 1H08 almost every second car was purchased via some form of financing scheme – be it lease or credit. Figure 11: Auto sales in Russia New car sales (mn units)
Figure 12: Credit vs cash in auto sales (mn units) Share of import (rhs)
80%
2.0
70%
1.8
60%
1.5
50%
1.3
40%
1.0
30%
0.8
20%
0.5
0.5
10%
0.3
0.0
0%
0.0
3.5 3.0 2.5 2.0 1.5
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1.0
Credit
Cash
Share of credit sales (rhs)
60% 50% 40% 30% 20% 10% 0%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: AEB, Customs, Ministry of Industry and Trade
Source: Autostat, AEB
We note, however, that domestic production failed to keep up with rising demand: output grew by only 4.5% per year over 1994-08, accounting for only half of the new cars sold in Russia in 2008. Figure 13: Breakdown on new auto sales in Russia (mn cars sold) 2.0
Russian brands Locally assembled foreign brands New import
1.5
1.0
0.5
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: AEB, Ministry of Industry and Trade, Aton estimates
1 1
The 2008-09 crisis had a strong impact on the Russian economy and auto sales nearly halved in 2009. While the market has gained some momentum since then, new car sales have still not reached their pre-crisis level. Figure 14: Monthly auto sales in Russia
Figure 15: Monthly auto sales in Russia (by price range) 350
350 300
2012
300
250
2011
250
200
2008 2010
200
150
Below $20,000 $20,000-30,000 Above $30,000
150
2009
100
100
50
50
0
0 Jan-08 Aug-08 Mar-09 Oct-09 May-10 Dec-10 Jul-11 Feb-12
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Source: AEB, Aton estimates
Source: AEB, Aton estimates
We note that in contrast to what occurred in the US and the EU, the Russian automotive industry did not receive any immediate state support in 2009 (and neither did consumers). Only AvtoVAZ and KAMAZ were bailed out when the state stepped in to offer long-term money. The industry was forced to make ends meet throughout 2009; the so-called ‘cash-for-clunckers’ programme was launched only in 2010. To the state’s credit, the cash-for-clunkers programme became a major driver for Russian auto sales in 2010-11. As a result, in 2011, Russia become the second-biggest market for new auto sales when compared to major EU nations. Figure 16: New auto sales in Russia and EU countries (mn cars) 1.5 2.1 2.0
Italy 1.7 0.3 1.5 UK
1.9 2.0 1.9 0.4
2008 1.4
2009
2.2 2.3 2.1
France
2010 2011
0.4
6M12
2.1 3.8
Germany
2.9 3.2 0.6 2.0 1.6
Russia
1.9 0.5
2.7
Source: AEB, ACEA, Aton estimates
1 2
With 0.5mn cars sold in 1H12, Russia moved closer to the the EU’s largest market, Germany. In Germany, the number of cars per 1,000 people was well above 500 in 2011, while for Russia the number was 257 cars per 1,000. This suggests that Russia’s market is far from mature. The chart below suggests the direction the Russian car market could take if living standards, fuelled by a potentially growing economy, continue to rise, supporting demand for new cars. This process would also mean increased demand for the tyre industry’s products. Figure 17: Russia compared to other countries, number of cars per 1,000 people (2011)
Source: AEB, ACEA, World Bank, IMF, US DoT
Figure 18: Auto sales by brand (2011)
Figure 19: Car production by company (2011)
Lada 21.5% Kia 5.8%
Others 54.2%
Renault 5.8% Hyundai 6.2% Chevrolet 6.5%
Source: AEB, Aton estimates
1 3
Others 31.4%
AvtoVAZ 32.1%
Volkswagen Avtotor 7.7% 12.7% Avtoframos 8.1% Hyundai 8% Source: Autostat
Russia’s Tyre Market – Preparing for Changes With 55.5mn tyres sold in 2011, the Russian tyre market surpassed the sales records of the pre-crisis years of 2007-08. The overall economic recovery, as well as strong pent-up demand, were the key factors driving the market. According to Sibur-Russian Tyres, in 2011 the market expanded 30% YoY to RUB213.6bn with the average tyre price increasing 5.6% YoY to RUB3,850. Figure 20: Tyre sales by segment (mn)
Figure 21: Tyre sales by type (mn)
80 70 60
80 A - premium ($90-160/piece) B - mid-price($60-90/piece) C - budget ($35-60/piece)
50
60
A
40
90
Trucks LCV Passenger
70
30%
Figure 22: Tyre sales by origin (mn)
70
32%
B
20
30
30
10
20 38%
10
C
0
10
-10
0 2007
2008
2009
2010
Import
50
50 40
30
Export Production
2011
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
-30 Source: Cordiant
Russia’s tyre market has generally been categorised into three major groups:
A tyres which are regarded as premium ($90-160 each for light tyres and $470-630 for truck tyres) B tyres of the mid-price or branded segment ($60-90 for light and $310-390 for truck tyres) C tyres form the non-branded, budget segment ($35-60 for light and $120280 for truck tyres)
The combined share of the A and B segments in total sales rose to 62% in 2011 vs 42% in 2007. The premiumisation trend was largely attributable to the following factors, in our view:
1 4
The higher share of foreign branded cars in total sales (both imported and domestically produced) to 73% in 2011 vs 66% in 2007 An increase in the average foreign branded car price from $23,200 in 2007 to $30,000 in 2011, which suggests that consumers were trading up
Figure 23: Market share by sales (2011)
Figure 24: Tyre production by company (2011) Others 1.3mn
Sibur-Russian Tyres 13.4% Nizhnekamskshina 10.1% Others 48.6%
Michelin 9.9% Nokian Tyres 9.3% Bridgestone 8.7%
ASHK 1.4mn Amtel 7.9mn
Nizhnekamskshina 10.8mn
Total production in 2011: 40.9mn
Sibur-Russian Tyres 8.9mn
Nokian Tyres 9.2mn
Source: Cordiant, Aton estimates
The A+B segment is dominated by international brands as local producers have historically been oriented towards Russian car manufacturers, while imports of cheap C segment tyres are limited by a restrictive duty (set at either 20% of the value or EUR6.2/tyre, whichever is highest). We note that the rapid increase in the share of imported tyres (from 34% in 2007 to 47% in 2011) largely involved A and B group tyres. Going forward we estimate that the C segment’s market share will decline to 30% in 2013 and 25% in 2015 as foreign producers expand their capacity in Russia and WTO entry leads to a gradual reduction of import duties.
Key Market Players Nizhnekamshina (NKSH) is by far the largest tyre producer in Russia with a market share of 26.4% in volume terms in 2011; its output reached 10.8mn tyres that year. The company sells around 20% of its output directly to automakers with about 60% of its production sold on the retail market. The company owns the KAMA brand. In late 2010, NKSH and SIBUR applied to the Federal Antimonopoly Service for permission to merge their tyre-producing assets. The combined company could have accounted for a 57% market share, providing a strong position from which to compete with foreign producers. However, in July 2011, SIBUR announced that it would sell a number of production assets to a JV composed of Italy’s Pirelli and Russian Technologies for EUR222mn ($320mn). Among other assets, SIBUR agreed to sell the Kirovsky Tire Plant (output of 6mn tyres per year) and Voronezh Tire Plant (2.5mn per year). Pirelli and Russian Technologies now plan to spend EUR200mn on expanding total capacity from the current 8.5mn tyres/year to 10.5mn by 2015. Sibur-Russian Tyres (now renamed Cordiant) produces tyres under the Cordiant, Matador (through a JV with Continental) and TyRex brands. The company’s major plants are located in Yarshina and Omskshina in the Yaroslav and Omsk regions. France’s Michelin owns a 2mn tyres/year plant in Moscow region and is considering plans for its expansion.
1 5
With developed markets showing signs of stagnation, a number of foreign tyre producers have turned their eyes to Russia. In Nov 2011 Continental AG (brands include Continental, Gislayed, Matador and Barum) launched construction of a EUR200mn plant in Kaluga region which is scheduled to produce 4mn tyres a year by late 2013 (with long-term plans to double capacity to 8mn tyres). Japan’s Yokohama opened a plant in Lipetsk region in May 2012. The EUR125mn plant currently produces 1.4mn tyres/year and the company plans to expand output to 3-4mn tyres at a cost of around EUR175mn within the next three years.
1 6
Nokian Tyres – Winter is Coming Company Overview Headquartered in Finland, Nokian Renkaat operates two major production assets – in Nokia, Finland (capacity: 7mn tyres per year) and Vsevolzhsk, Russia (11mn). The company produces both passenger (74% of 2011 revenues) and heavy truck tyres (8%). Around 20% of 2011 revenue was generated through Vianor, a tyre chain composed of 910 stores in 23 countries. By geography of sales, revenue from Nordic countries (Finland, Sweden and Norway) accounted for 38% of the total in 2011. Sales in Russia and the CIS accounted for 27%. We note that the company’s Russian plant produced 9.5mn tyres in 2011, and 60% of this output was exported. The Russian market We expect Russia to drive Nokian’s revenues going forward with the share of sales in Russia and the CIS growing from 27% in 2011 to 40% in 2014, on our estimates. Figure 25: Revenue forecast for Russia and the CIS (EURmn) 1,200
Russia and the CIS
Share of total (rhs)
80% 70%
1,000
60% 800
50%
600
40% 30%
400
20% 200
10%
0
0% 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E Source: Company data, Aton estimates
Nokia is well positioned to benefit from increasing tyre sales in Russia, in our view. The company held the biggest share of the replacement market in 2011 (22% in volume terms) in the premium A+B segments with Japan’s Yokohama a distant second at 15%. Notably, Nokian’s market share in winter tyres in Russia was over 30% in 2011. Figure 26: A+B replacement market breakdown (2011)
Others 33%
Nokian Tyres 22% A+B tyre replacement market: 17mn
Continental 7% Michelin
Yokohama
Bridgestone
Source: Company data
1 7
Going forward, we expect Russia’s replacement tyre market to grow from 35mn in 2011 to 51mn by 2017. In money terms, we forecast the total A+B+C market to reach EUR3.3bn in 2016. Figure 27: Russian tyre market forecast (EURmn) A - premium
B - mid-price
C - budget
4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2007
2008
2009
2010
2011 2012E 2013E 2014E 2015E 2016E Source: Company data, Aton estimates
Our forecast is largely based on new auto sales in Russia, which we model to grow at a CAGR of 7.0% in 2011-17. This should result in the automobile fleet expanding to 52.2mn by 2017. Nokian reports that 27% of its revenue came from Russia and the CIS in 2011. As noted, the company exports approximately 60% of the production from its Vsevolzhsk plant. Using the RAS accounts of Nokian’s 100%-owned Russia subsidiary, LLC Nokian Shina, we attempted to estimate the share of revenue generated by Russian-manufactured tyres. We believe that in 2011, this amounted to around 47%, which underscores the importance of the company’s business in Russia. Figure 28: LLC Nokian Shina − selected RAS P&L items (EURmn) 2007
2008
2009
2010
2011
Revenue
321.9
360.0
289.7
448.4
665.7
CoGS
-224.3
-251.1
-205.0
-322.9
-412.2
Gross profit
97.6
108.9
84.7
125.6
253.5
SG&A
-18.0
-20.8
-24.0
-28.2
-36.3
Operating profit
79.7
88.1
60.6
97.3
217.2
Interest received
0.1
0.5
6.1
7.6
3.5
Interest paid
-2.3
-5.5
-23.6
-6.7
-5.6
Other non-operating income
5.5
1.0
20.1
18.8
36.0
Other non-operating expenses
-3.6
-7.1
-17.7
-19.2
-32.0
Pre-tax profit
79.3
77.1
45.6
97.8
219.1
Income tax
-17.2
-19.8
-8.6
-16.1
-38.9
Net profit
62.2
57.3
37.0
81.7
181.8
Gross margin
30.3%
30.3%
29.2%
28.0%
38.1%
Operating margin
24.7%
24.5%
20.9%
21.7%
32.6%
Net margin
19.3%
15.9%
12.8%
18.2%
27.3%
Profitability
Source: SPARK-Interfax, Aton estimates
1 8
Nordic countries We estimate that the combined tyre replacement market for Finland, Sweden and Norway was a notch above 11mn tyres in 2011. Given the relatively mature profile of the region’s auto market (with a car density of around 550 vehicles per 1,000 population), we do not expect the market to exhibit rapid growth (we estimate 2.5% per year in the long term). Going forward, we think that Nokian will be able to retain its market share in the Nordic region at 25-30%. Figure 29: Revenue forecast − Nordic countries (EURmn) Nordic countries
700
Share of total (rhs)
80% 70%
600
60%
500
50%
400
40% 300
30%
200
20%
100
10%
0
0% 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E Source: Company data, Aton estimates
The rest of Europe In 2011, Nokian generated 28% of its revenue in Central and Eastern Europe. Although we do not expect the market to grow more than 2% pa going forward, we note that it is less sensitive to economic downturns than emerging markets like Russia. In addition, the company’s traditionally strong position in the winter tyre segment is reinforced by the fact that they are mandatory in certain countries. Figure 30: Revenue forecast − the rest of Europe (EURmn) 500 450 400 350 300 250 200 150 100 50 0
The rest of Europe
Share of total (rhs)
80% 70% 60% 50% 40% 30% 20% 10% 0%
2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E Source: Company data, Aton estimates
1 9
North America We expect the share of revenues generated in North America to gradually decrease from 7% in 2011 to about 5% in four years’ time. Although the market for replacement tyres is huge (over 285mn pa), we note that strong competition should restrict the company’s revenue growth to 2.0-2.5% pa, on our estimates. Figure 31: Revenue forecast from North America (EURmn) North America
140
Share of total (rhs)
80% 70%
120
60%
100
50%
80
40% 60
30%
40
20%
20
10%
0
0% 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E Source: Company data, Aton estimates
Cost structure Raw materials are the major cost item, accounting for 53% of the company’s production costs in 2011, while personnel compensation came in second at 24%. Figure 32: Raw material consumption (2011)
Figure 33: Raw material price development index 250 200
Natural rubber 30%
150
Synthetic polymers 31%
100 Reinforced materials 16%
50
Chemicals 11% Fillers 12%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E
0
Source: Company data
Source: Company data. Aton estimates
While it is widely perceived that high oil prices are beneficial for the Russian economy overall, tyre producers find themselves on the receiving end as oil-based products are major cost components. Natural rubber is second-most important raw material in tyre production. No tyre producer can affect the pricing of these two components directly as they are the function of many factors. However, given that 60% of Nokian’s production capacity is based in Russia, the company does benefit from lower payroll costs, cheaper energy, and a favourable tax regime when compared to the EU countries.
2 0
Capex Spending on new production lines at the Vsevolzhsk plant should be the major capex item for the company over the next few years. The plant’s capacity in FY11 stood at 11mn tyres, which is set to increase to 14mn in 2012 when two new production lines are opened. Two additional lines are planned to be installed in 2013-14, bringing total capacity to around 17mn tyres per year. Figure 34: Capex (EURmn) Net capex
300
Capex/sales ratio
14% 12%
250
10%
200
8% 150 6% 100
4%
50
2%
0
0% 2009
2010
2011 2012E 2013E 2014E 2015E 2016E 2017E Source: Company data, Aton estimates
Dividends Nokian Tyres has established a dividend policy that calls for a 35% pay-out ratio, which we expect to remain unchanged going forward. All in all, we believe Nokian Tyres presents a unique combination of sound fundamentals and direct exposure to the Europe’s soon-to-be largest automobile market. But there is one more thing…
2 1
Corporate Governance Corporate governance has always been a concern for foreign investors looking for exposure to Russia. Although many agree that the Russian automobile market offers a unique growth profile, equity exposure to the sector is highly limited due to the lack of investable companies. In our attempt to assess the quality of corporate governance standards, we used the GAMMA methodology developed by Standard & Poor’s. This approach addresses four major corporate governance issues via a number of scoring and analytical methods. Figure 35: Corporate governance score (10 = highest score) OWNERSHIP STRUCTURE & EXTERNAL INFLUENCE Transparency of ownership Concentration & influence of ownership Influence of external stakeholders FINANCIAL STAKEHOLDERS RIGHTS & RELATIONS Voting & shareholder meeting procedures Ownership & financial rights Shareholder rights disclosure Takeover defences TRANSPARENCY & DISCLOSURE Financial information & audit process Operational information Board & management information Board & management remuneration disclosure Board structure & effectiveness Board composition Board effectiveness Board & executive compensation Corporate governance score
30%
Sector average 5.0
25%
6.7
25%
5.9
20%
5.9
5.8
GAZ Group 4.7 7.4 2.5 4.3 6.6 6.8 6.4 6.5 6.7 5.6 6.2 5.5 6.0 4.5 6.2 6.7 7.0 4.9
Sollers 6.3 8.4 6.0 4.5 7.1 6.8 7.3 7.4 6.7 6.7 6.2 7.5 8.5 4.5 6.7 7.5 7.5 5.0
5.7
6.6
AvtoVaz 4.5 7.5 1.8 4.3 6.5 6.8 6.5 6.2 6.7 5.7 5.7 5.8 8.4 2.8 5.3 4.9 6.5 4.4
KAMAZ 4.5 7.4 1.8 4.5 6.5 6.8 6.5 5.9 6.7 5.8 5.9 6.1 8.4 2.6 5.5 6.0 6.3 4.4
Nokian Tyres 6.9 9.1 4.5 7.2 7.6 8.2 7.2 7.7 7.1 7.8 8.1 6.5 9.0 7.5 8.0 8.5 8.2 7.2
5.3 5.4 7.5 Source: Companies. Aton estimates
Sollers (6.6): This company exhibits by far the most balanced corporate governance profile among its Russian peers. We see no obvious weak points Sollers has steadily delivered an average level of corporate governance over the past few years, in our view. However, the introduction of quarterly reporting would be a good way to improve the company's transparency, in our view. GAZ Group (5.7): The company is notorious for going completely silent in 2008-10 when it was undergoing a credit restructuring process. We believe that its score could have been lower but for its recent attempts to improve corporate governance by conducting a series of investor meetings, outlining its development strategy and producing the long-awaited financial reports. AvtoVAZ (5.3): We believe that AvtoVAZ's corporate governance should improve after Renault-Nissan assumes control of the company. At the moment, however, the lack of board independence, quasi-state control and poor minority shareholder protection results in a mediocre corporate governance score. Although it is Russia’s largest automaker, the company has only recently established an investor relations department.
2 2
KAMAZ (5.4): Yet another Russian car producer which is indirectly controlled by the state, which we do not believe is supportive of good corporate governance. Nevertheless, we note that KAMAZ's board looks more independent than AvtoVAZ’s. We believe that once Daimler acquires control of the company, the German automaker may take steps to improve corporate governance. Nokian Tyres (7.5): Headquartered in Finland, the company follows the industry’s best corporate governance practices: it has an independent board, a transparent shareholder structure and a very good level of information disclosure. Our comparison of Nokian Tyres with Russia’s listed automakers clearly places Nokian ahead of its Russian peers on virtually every point. However, this does not mean that investors should disregard the Russian firms – GAZ Group and Sollers in particular should not be ignored. Rather, our main aim has been to provide a slightly different angle on how to capitalise on the Russian automobile market via Nokian Tyres – a company that offers Western corporate governance practices allied with Russian growth prospects.
2 3
Nokian Tyres: Snapshot Figure 36: Tyre production in Russia (2011) Others 1.3mn ASHK 1.4mn Amtel 7.9mn
Figure 37: Selected financial metrics (EURmn) Net sales
2,500 Nizhnekamskshina 10.8mn
Total production in 2011:
EBITDA
EBITDA margin
35% 30%
2,000
25% 1,500
20%
1,000
15% 10%
Sibur-Russian Tyres 8.9mn
Nokian Tyres 9.2mn
500
5%
0
0% 2009
2010
2011 2012E 2013E 2014E 2015E 2016E
Source: Cordiant
Figure 38: Russian replacement A+B market (2011)
Source: Company data, Aton estimates
Figure 39: Capex (EURmn) 300
Nokian Tyres 22%
Others 33%
A+B tyre replacement Continental market: 17mn 7%
Net capex
Capex/sales ratio
12.0%
250
10.0%
200
8.0% 150 6.0% 100
Yokohama 15%
Michelin 10% Bridgestone 13%
14.0%
4.0%
50
2.0%
0
0.0% 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E
Source: Company data
Figure 40: Revenue breakdown (2011)
Source: Company data, Aton estimates
Figure 41: Revenue breakdown (EURmn) Nordic countries Rest of Europe
Russia and CIS North America
2.5 Rest of Europe 28%
Nordic countries 37.7%
2.0 1.5
Total revenue: EUR1.5bn
1.0 0.5
Russia and CIS 26.8%
North America 7%
Source: Company data
2 4
0.0 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E
Source: Company data, Aton estimates
Financial Statements Figure 42: Income statement (EURmn)
Net sales CoGS Gross profit Other operating income SG&A Other operating expenses Operating profit EBITDA Net financial expenses Profit before tax Tax expense Effective tax rate Net profit YoY growth rates Revenues Gross profit Operating profit EBITDA Profit before tax Net profit Profitability Gross margin Operating margin EBITDA margin Net margin
CAGR '11-16E 9.4% 9.8% 8.9% 1.7% 8.2% 1.7% 9.7% 10.5% -15.4% 10.6% 15.0%
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
1,081 -588 493 2 -226 -22 247 303 -73 173 -34 20% 140
799 -478 320 2 -199 -22 102 164 -29 73 -15 21% 58
1,058 -604 454 4 -221 -16 222 292 -13 209 -39 19% 170
1,457 -806 651 2 -246 -27 380 452 -21 359 -50 14% 309
1,648 -912 736 2 -264 -27 447 523 -11 435 -74 17% 361
1,805 -1,016 789 2 -289 -28 474 566 -9 465 -79 17% 386
1,958 -1,092 865 2 -313 -28 526 634 -9 517 -88 17% 429
2,097 -1,188 908 2 -335 -29 546 670 -9 537 -91 17% 446
2,282 -1,285 997 2 -365 -29 605 744 -9 596 -101 17% 495
5% 8% 5% 8% -19% -17%
-26% -35% -59% -46% -58% -58%
32% 42% 118% 78% 185% 192%
38% 43% 71% 55% 72% 82%
13% 13% 17% 16% 21% 17%
10% 7% 6% 8% 7% 7%
8% 10% 11% 12% 11% 11%
7% 5% 4% 6% 4% 4%
9% 10% 11% 11% 11% 11%
46% 23% 28% 13%
40% 13% 21% 7%
43% 21% 28% 16%
45% 26% 31% 21%
45% 27% 32% 22%
44% 26% 31% 21%
44% 43% 44% 27% 26% 27% 32% 32% 33% 22% 21% 22% Source: Company data, Aton estimates
9.9%
Figure 43: Cash flow statement (EURmn) Cash flows from operating activities EBIT Adjustments for: DD&A Operating cash flows before working capital changes (Increase)/decrease in inventories (Increase)/decrease in receivables (Increase)/decrease in other current assets (Decrease)/increase in payables Net change in other current liabilities Cash generated from operations Income tax paid Interest paid & other taxes Net cash flows generated from operating activities Cash flows from investing activities CAPEX Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Dividends paid to shareholders Net cash (used in)/generated from financing activities Adjustments Net change in cash Cash at the beginning of the year Cash at the end of the year
2 5
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
CAGR '11-16E
247
102
222
380
447
474
526
546
605
56 303 98 89 44 45 -46 72 -34 -73 -35
62 164 -91 -59 -6 -79 -36 205 -15 -29 161
69 292 11 9 0 67 57 396 -39 -13 343
72 452 113 81 -15 21 14 308 -50 -21 236
76 523 8 98 -3 48 0 469 -74 -11 384
91 566 50 64 3 27 0 476 -79 -9 388
108 634 30 46 2 12 0 568 -88 -9 471
124 670 45 47 5 21 0 593 -91 -9 492
139 744 46 70 1 27 0 654 -101 -9 543
181 -181
87 -87
51 -51
162 -162
193 -193
216 -216
221 -221
235 -235
256 -256
172 0 49 123 48 -45 158 113
35 -141 20 -126 1 -51 113 63
0 -109 51 -159 21 154 63 217
243 0 84 160 14 248 217 465
0 -211 126 -337 0 -146 465 318
0 -50 135 -185 0 -13 318 305
0 0 0 0 0 0 150 156 173 16% -150 -156 -173 0 0 0 100 101 115 -14% 305 405 506 405 506 621 Source: Company data, Aton estimates
10%
16%
18% 10%
Figure 44: Balance sheet (EURmn) PP&E Total non-current assets Inventories Trade and other receivables Cash and cash equivalents Total current assets Total assets Total equity Interest-bearing financial liabilities Total non-current liabilities Trade and other payables Interest-bearing financial liabilities Total current liabilities Total liabilities Total liabilities and equity Total debt Net debt Net debt/EBITDA Interest coverage ROE decomposition Net margin Leverage Assets turnover
2008 500 605 291 378 113 816 1,420 777 395 425 177 38 218 643 1,420 432 319 1.1 3.4 17.9% 13% 1.8 0.8
2 6
2009 508 621 200 320 63 601 1,222 758 254 287 98 73 178 464 1,222 326 264 1.6 3.6 7.7% 7% 1.6 0.7
2010 484 605 211 329 217 766 1,372 937 204 246 165 13 189 435 1,372 218 1 0.0 16.6 18.1% 16% 1.5 0.8
2011 560 671 324 409 465 1,205 1,876 1,186 208 241 186 253 448 690 1,876 461 -4 neg. 18.2 26.0% 21% 1.6 0.8
2012E 677 784 332 507 318 1,165 1,948 1,421 200 234 234 50 293 527 1,948 250 -68 neg. 39.4 25.4% 22% 1.4 0.8
2013E 801 911 382 571 305 1,265 2,177 1,672 150 184 262 50 321 505 2,177 200 -105 neg. 52.3 23.1% 21% 1.3 0.8
2014E 913 1,026 412 616 405 1,441 2,468 1,951 150 184 274 50 333 517 2,468 200 -205 neg. 58.0 22.0% 22% 1.3 0.8
2015E 2016E CAGR '11-16E 1,025 1,142 15.3% 1,143 1,261 13.5% 458 503 9.2% 664 734 12.4% 506 621 6.0% 1,635 1,865 9.1% 2,778 3,126 10.8% 2,241 2,562 16.6% 150 150 -6.3% 184 184 -5.3% 295 321 11.5% 50 50 -27.7% 354 380 -3.2% 537 564 -3.9% 2,778 3,126 10.8% 200 200 -306 -421 neg. neg. 60.2 66.7 19.9% 19.3% 21% 22% 1.2 1.2 0.8 0.7 Source: Company data, Aton estimates
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Analyst certification This investment research (“the research”) has been prepared by the analyst(s) of ATON LLC, whose name(s) appear(s) on the front page of the research. Each analyst certifies that with respect to the company and such securities and markets, all the views expressed in the research accurately reflect his or her personal views about the company and any and all of such securities and markets. Each analyst and/or persons connected with any analyst may have interacted with sales and trading personnel, or similar, for the purpose of gathering, synthesising and interpreting market information. Any ratings, forecasts, estimates, opinions or views in the research constitute a judgment as at the date of the research. If the date of the research is not current, the views and contents may not reflect the analysts’ current thinking. The research has been produced independently of the company and any ratings, forecasts, estimates and opinions reflect only the analyst’s personal view. While all reasonable care has been taken to ensure that the facts stated therein are accurate and that the forecasts, estimates, opinions and views contained therein are fair and reasonable, neither the analysts, the company, nor any of its directors, officers or employees, have verified the contents thereof unless disclosed otherwise below. Accordingly, neither the analysts, the company, nor any of its directors, officers or employees, shall be in any way responsible for the contents thereof, and no reliance should be placed on the accuracy, fairness or completeness of the information contained in the research. Neither the analysts, the company, nor any of its directors, officers or employees, accept any liability whatsoever for any loss howsoever arising from any use of the research or its contents or otherwise arising in connection therewith. Each analyst and/or persons connected with any of them may have acted upon or used the information herein contained, or the data or analysis on which it is based, before its publication. This research may not be relied upon by any of its recipients or any other person in making investment decisions with respect to the company’s securities. The research does not constitute a valuation of the company’s business, assets or securities for the purposes of the legislation on valuation activities for the company’s country. No part of his or her compensation was, or will be, directly or indirectly related to the specific ratings, forecasts, estimates, opinions or views in the research. Analysts’ compensation is determined based upon activities and services intended to benefit investor clients. Like all of ATON LLC employees, analysts receive compensation that is impacted by overall ATON LLC profitability, which includes revenues from other business units within ATON LLC. Each analyst or his or her affiliated company or other persons is or may be a member of underwriting group in a respect of proposed offering of the securities of the company. Each analyst may in the future participate in an offering of the company’s securities.
Investment ratings Investment ratings are a function of ATONLINE LIMITED expectation of total return on equity (forecast price appreciation and dividend yield within the next 12 months, unless stated otherwise in the research). The investment ratings may be determined by the following standard ranges: Buy (expected total return of 15% or more); Hold (expected total return of 0‐15%); Sell (expected negative total return). Standard ranges do not always apply to emerging markets securities and ratings may be assigned on the basis of the analyst’s knowledge of the securities. Investment ratings are determined at the time of initiation of coverage of a company of equity securities, or a change in target price of any of the company’s equity securities. At other times, the expected total returns may fall outside of the range used at the time of setting a rating because of price movement and/or volatility. Such interim deviations will be permitted but will be subject to review by Research Department Management. It may be necessary to temporarily place the investment rating “Under Review” during which period the previously stated investment rating may no longer reflect the analysts’ current thinking. For companies where ATONLINE LIMITED has not expressed a commitment to provide continuous coverage, to keep you informed, analysts may prepare research covering significant events or background information without an investment rating. Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the security’s expected performance and risk.
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Aton OOO (LLC)
Atonline Limited
Central City Tower, 20 Ovchinnikovskaya Emb., Bld.1, Moscow, 115035, Russia
Registered address: Themistokli Dervi, 5, Elenion Building, 2nd Floor, P.C. 2066, Nicosia, Cyprus
tel.: +7 (495) 777 6677; +7 (495) 777 8877
Office: 20 Kyriacos Matsis Avenue, 4th Floor, CY-1096 Nicosia, Cyprus
fax: +7 (495) 777 8876
tel.: +357 (22) 680015
ATON (Bloomberg)
fax: +357 (22) 680016
www.aton.ru
Regulated by Cyprus Securities & Exchange Commission
www.atonbroker.com RTS, MICEX, NAUFOR Member
Head of Research
Pavel Gronbjerg
Head of International Equity Sales Martin Gollner
+7 (495) 287 8650
[email protected]
+44 20 7011 9662
[email protected]
+7 (495) 213 0340
Head of Equities
Alexei Yazikov
[email protected]
Head of Domestic Equity Sales Anton Snobkov
Head of Fixed Income
+7 (495) 287 9280
[email protected]
+7 (495) 705 9942
[email protected]
Murat Bersekov
ATON RESEARCH TEAM Strategy
Oil & Gas
Peter Westin
Elena Savchik
Editorial & Production Lauren Mandy
+7 (495) 213 0341
+7 (495) 213 0343
+7 (495) 777 6677 (ext. 2648)
[email protected]
[email protected]
[email protected]
Andrew Risk
Slava Bunkov
Thomas Lavrakas
+7 (495) 777 6677 (ext. 2641)
+7 (495) 213 0344
+7 (495) 777 6677 (ext. 2686)
[email protected]
[email protected]
[email protected]
Sergey Kolokolov
Anna Lakeychuk
Anna Bogdanova
+7 (495) 777 6677 (ext. 2671)
+7 (495) 777 6677 (ext. 2661)
+7 (495) 777 6677 (ext. 2657)
[email protected]
[email protected]
[email protected]
Utilities
Consumer Goods & Retail
Technical Analysis
Ilya Koupreyev
Marina Gutneva
Elena Kozhukhova
7 (495) 213 0335
+7 (495) 777 6677 (ext. 2645)
+7 (495) 777 6677 (ext. 2672)
[email protected]
[email protected]
[email protected]
Pavel Lastovkin
Alexey Evstratenkov
+7 (495) 777 6677 (ext. 2683)
+7 (495) 777 6677 (ext. 2679)
[email protected]
[email protected]
Metals & Mining
Financials
Dinnur Galikhanov
Rinat Kirdan
Equity Sales Trading
+7 (495) 213 0338
+7 (495) 213 0342
Please contact:
[email protected]
[email protected]
+7 (495) 287 9287
Ilya Makarov
Ivan Kachkovski
+7 (495) 777 6677 (ext. 2644)
+7 (495) 705 9232
[email protected]
[email protected]
Special Situations & Small Caps Mikhail Pak
Fixed Income & Economics
+7 (495) 213 0337
Rinat Kirdan
[email protected]
+7 (495) 213 0342
Please contact:
[email protected]
+7 (495) 287 8609
Nikita Melnikov +7 (495) 213 0336
Andrey Bobovnikov
[email protected]
+7 (495) 287 8648
Telecoms & Media
[email protected]
Stanislav Yudin +7 (495) 213 0339
[email protected]
Fixed Income Sales
Anna Bogdyukevich +7 (495) 213 0334
[email protected]
