News and Analytical survey

Russian market: respite is over

Market and companies news

Gazprom has agreed to a set of commitments to settle an investigation of European Commission. If the monopoly agrees to come forward removing restrictions on customers re-selling gas across borders, it could receive about $5 billion less in profits due to price difference, but it will relieve itself from penalties by comparable sum. Besides, supply volumes could gain by 5 … 15 bcm, in case Southern Europe countries will approve additional gas supply.

Transneft reported 2016 earnings in accordance with IFRS. Net income exceeded 230 billion rubles, up 60% more from the last year. EBITDA grew by 10% to 408 billion rubles, and the margin was 48%. For today, it is one of the most profitable Russian industrial companies.

MTS reported 2016 results by IFRS and updated development strategy. MTS revenue increased by 2% to 435 billion rubles. Profitability of OIBDA was down to 38.8% from 41.5%. The debt grew to 220 billion rubles, or 1,3x OIBDA. Company profit declined by 2%, to 48,5 billion rubles. In 2017 MTS stakes on development of digital technologies.

We expect

We expect that the market will continue correction to the level 1930 points on MICEX. Bank, energy and metallurgy shares will underperform, and certain stock of material companies and banks will outperform. We expect USDRUB rate in the range of 58 - 60.

Our strategy

As defensive ideas we recommend to buy Surgutneftegas, ALROSA, Rostelecom, Yandex N.V. To buy with horizon 3 – 4 weeks we consider shares of Gazprom, VTB Bank, Lenta, Lukoil, Mostotrest. As speculative idea it is possible to consider to short JSC Sberbank and NLMK.

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