Jun
18
On June 4th LUKOIL published its US GAAP-compliant financial report of 1Q 2008. Company’s net income of reported period rose over 2.4 times versus similar value of 2007, from 1.299 bn USD to 3.163 bn USD. However versus 4Q 2007 (3.213 bn USD) net income has been dropped -1.6%.
During 1Q 2008 LUKOIL’s sales rose +59.4% versus similar term of 2007 and formed 24.955 bn USD, we must say though that we have expected a much wider value (27.06 bn USD), whereas EBITDA hiked +99.1% to 4.824 bn USD.
EBITDA margin of LUKOIL in 1Q 2008 and formed 19.2%, appearing +3.8 p.p. above past year’s 1Q and +0.2 p.p. above past annum result, net income margin added +4.3 p.p. to 12.6%.
The growth of net income was supported by several factors, among them – growth of quarter average prices of oil & oil products of the group, which added about +70% in between 1Q 2007 and 1Q 2008. Secondly – the expansion of sales volumes +4% in 1Q 2008.
We have corrected our model of LUKOIL, introducing several changes into it, in particular we have corrected oil & oil products sales prices by company upwards at average of +24$ through current trends of global market of energy carriers and forecast of future development of world economy and global political environment.
In our model of LUKOIL we have tried to reflect the use of privilege taxation under mining tax over depleted deposits, starting with 2008. We have also included future change of mining tax calculation scale itself, which was set this March by A. Kudrin and supported by V. Putin, and will be accepted in 2009. The cut of oil mining tax rate, the application of tax holidays and privileged taxation at depleted spots would allow saving up to 1.2-1.5 bn USD per annum – depending on the price of commodity throughout particular forecast period.
We have also reviewed the volume of capital investments, expanding it over forecasted period at +17.5%, as company published its ambitious plans of development on next several years, whilst the service cost has been steadily growing over the past months.
The resulting corrections brought on a new fair price for stock of LUKOIL, which formed 138.44 USD apiece, versus previously forecasted 109.27 USD (+26.7%). Thus – we confirm our recommendation “BUY” on company’s stock.
LUKOIL: Tax initiatives engaged - June 17, 2008 (PDF)
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