Jun
24
During 2007 Gazprom Neft upped its US GAAP-compliant net income by +13.2% versus 2006, to 4.143 bn USD. The sales of the company expanded by +6.1% to 21.1 bn USD. Operating income rose by +12.2% to 4.899 bn USD, EBITDA +12.8% to 5.828 bn USD. Financial results of the company appeared above our expectations at average of 1.5% and 1.3% above market expectations.
The growth of net income was supported by several factors, among them was moderate growth of operating costs, forming only +4.3% and secondly the rise of non-operating income. In general – company’s cost structure has proved to be satisfactory.
Judging by all financials, Gazprom Neft has improved its effectiveness throughout 2007. EBITDA margin has formed 27.6%, appearing +1.6 p.p. above prior year, net income margin added 1.2 p.p. up to 19.6%. Invested capital margin of Gazprom Neft is still high, forming 28.4% as of 2007, which is 18 p.p. above average capital costs of company.
S We have corrected our model of Gazprom Neft, making several changes inside. In particular – we have corrected the forecast of oil & oil products prices of the company upwards at average of +27.6%, reflecting all operating elements of development strategy up to year 2020, accepted during spring 2008, and expanded investment plan of forecasted period plus 12.5%. As according to forecasts of company’s representatives, company would require 70 bn USD in order to accomplish the set strategy.
In our model of Gazprom we have reflected the influence form the use of special mining tax at depleted deposits, starting with 2008, as well as tax privileges at new regions, which are set to be applied in 2009. We have also considered the future change of mining tax calculation scale itself. As after January 1st 2009, the cut of oil extraction tax would save over 6 bn RUR during 2009.
The resulting fair price of Gazprom Neft’s stock formed 8.88 USD apiece, versus previously forecasted 6.26 USD, whilst the recommendation is changed to “ACCUMULATE” from “HOLD” due to current growth potential of 12.4%.
Gazprom Neft: Doing the "2020" strategy! - June 24, 2008 (PDF)