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Gazprom: 2008 financial results - May 07, 2009
Filed Under Bullet-moments |
We revised our estimation of Gazprom’s shares. The reason for updating the company’s model was the output financial report according to IAS for 2008.
Within 2008 the sales of Gazprom grew by 45.2% to 3,500 bn RUR versus 2007, operating profit – by 79.6% to 1,260 bn RUR, and net profit – 12.9% to 742.9 bn RUR. EBIT margin is also remarkable – it totaled 35.8%, which is by 6.8 p.p. higher than the estimates of 2007, EBITDA margin upped by 41.4%. However, net profit margin slipped by 6.8 p.p. and such dynamics was due to large loss on single financial items in 4Q. ROIC of Gazprom totaled 17.5% in 2008.
Speaking about the corrections of Gazprom’s model, we should outline our revision towards reduction gas extraction in 2009 from 510 bn cubic meters to 496 cubic meters, considering the estimates of 1Q of the current year and concern’s own estimates on recovery of demand for “blue fuel”. We also reduced average prices of gas to the far abroad directions by 6.4%, considering our forecast of oil prices and forecast of physical purchases of gas within the coming two years. Also our company’s model includes detailed target capital investments.
In our model, we did not revise the indexation principles of gas tariffs at the domestic market, though the government and MEDT develop various variants. Particularly, it is offered to reduce the gas tariffs growth rates in 2010 from the planned 28.1% to 7.5%, in 2011 – from 40% to 10% and in 2012 growth rate should total 10%. Naturally the decrease of gas tariffs’ indexation will lead to Gazprom’s income decrease and lowering of its value. So, if the planned changes are adopted, the total sales of Gazprom in 2010-2012 will loose 9%, profit will go 30% down. That in its turn will lead to reduction of the target price of gas monopoly’s shares. Note, gas sale at the domestic market in natural terms totals 53% of the whole volume of distribution and the given market is very important to the concern. We intend to consider the tariff policy change in our model only after the official adoption of the given decision.
As a result of corrections application the new fair value of Gazprom’s shares formed 9.25 USD versus 10 USD, forecasted earlier (7.5% down). But due to significant growth potential, which totals more than 100%, we confirm out recommendation BUY for the shares of the company.
Gazprom: 2008 financial results - May 07, 2009 (PDF)