Equity Analysis /
Russia

Steel market conditions remain strong

    Boris Krasnozhenov
    Boris Krasnozhenov

    Head of Research (Managing Director)

    Yulia Tolstykh
    Yulia Tolstykh

    Analyst, Metals & Mining

    Alfa
    17 September 2019
    Published by
    Overweight rating on the Russian steel sector reiterated: The Russian ferrous and carbon sector is oversold, in our view. Companies trade with a 20% discount average to through-the-cycle multiples, on our estimates. On a relative basis, we prefer NLMK (O/W, TP$27.6/GDR) and Severstal (O/W TP$17.6/GDR, previously E/W). We reiterate our O/W ratings on EVRAZ (TP£6.5/GDR) and MMK (TP$9.8/GDR). The following arguments support our call on Russian steels: high levels of upstream integration, cost leadership, ability to redirect volumes to the domestic market, strong balance sheets and solid dividend policies. From a global steel perspective, the market continues to underestimate Russia’s solid demand fundamentals, particularly iron ore and met coal, and it exaggerates the impact of the US-China trade war on Russia’s steel sector.