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Отрасли


Ukrainian Iron Ore / Украинская железная руда

Автор: Конкорд Консалтинг - 14.03.2008 - 66 стр.
ID (номер): 2628
Версия для печати


Дата выхода:14.03.2008
Количество страниц:66
Язык отчета:Русский
Способ предоставления:В электронном виде
Цена:2 500 грн.
Оплата:безналичные
Доставка:бесплатно, e-mail или экспресс-курьер 1-5 раб. дней (Россия, СНГ, вся планета)



Last year, the Ukrainian iron ore industry was completely reshuffled by two large deals: the merger of Metinvest and Smart group midyear  and the divestiture of Privat group’s ferrous metals & mining assets to Russian Evraz in late 2007. By yearend, Metinvest controlled nearly xx% of domestic sinter feed production and supplied xx% of sinter feed to the tradable local market. Moreover, with Evraz group, Metinvest jointly operates Pivdenny Iron Ore, further extending its influence on the regional iron ore market.

All six iron ore producers in our coverage universe benefit from stellar demand. Driven by expansion projects in the Ukrainian steel industry (consumer of xx% of domestic iron ore), by 2012 local demand will increase xx% for agglomerate and pellets, and xx% for lump ore. Exports will continue to rise as well, supported by the sheer growth of Asian markets (+125% yoy in 2007). We forecast prices for Ukrainian iron ore to jump in 2008 on the back of strong demand worldwide: local sinter feed prices by xx% yoy to USD xx/mt, while pellet prices by xx% yoy to USD xx/mt and export prices by xx% yoy to USD xx/mt.

Three local iron ore players are set to increase production in the mid-term, while the growth potential at the other three will be benign. Only two companies in the sector report financials that reflect their true economies, in our view.

Number one in liquidity, without a doubt, is Ferrexpo, with monthly volumes averaging USD 50-70 mln on the LSE. The next two are Poltava and Pivdenny Iron Ore, which together print 90% of the sector's combined USD 9-10 mln in turnover on the PFTS each month. The other three stocks trade sporadically due to limited free float.

В прошлом году, структура украинской железорудной отрасли была полностью изменена двумя большими сделками: слиянием Метинвест и Смарт-групп в середине года и передачей железорудных активов группы Приват русскому Евраз в конце 2007-го. К концу года, Метинвест контролировал около половины производства и поставки концентрата на локальный рынок. Более того, совместно с Евраз, Метинвест управляет Южным ГОКом, и далее увеличивая свое влияние на региональный рынок железной руды.

Все шесть производителей железной руды, покрываемые нами, получают выгоду от стремительно растущего спроса. Руководствуясь проектами развития украинской сталелитейной промышленности, мы прогнозируем значительный рост локального спроса на агломераты, окатыши и крупнокусковую руду. Экспорт также будет продолжать расти, поддерживаемый явным ростом азиатских рынков (+125% в 2007). Мы прогнозируем, что цены на железную руду резко подскочат в 2008 на почве возросшего спроса по всему миру.

Трое локальных железнорудных игрока собираются увеличить отпуск руды в среднесрочной перспективе, в то время как потенциал роста других трех будет небольшим. На наш взгляд, только две из шести компаний отрасли не искажают реальную финансовую отчетность.

Номер один по уровню ликвидности, без сомнения, Ferrexpo, с ежемесячным объемом торгов на LSE 50-70 млн долл США. Двое следующих – Полтавский и Южные ГОКи, с общим объемом торгов на уровне 90% от общих торгов отрасли на ПФТС: 9-10 млн долл США ежемесячно. Остальные три компании торгуются единичными случаями из-за ограниченного количества акций в свободном обращении.

 

TABLE OF CONTENTS

1. Investment thesis
Investment summary
Investment opportunities
Valuation summary
Stock market monitor

2. Iron ore market overview
Supply: controlled by four
SECTOR RESHUFFLED: LIFE BEFORE AND BEYOND 2007
NEW PROJECTS: DRI PELLETS & KGOKOR
IMPORT POTENTIAL IS LIMITED
Demand plays into suppliers’ hands
Local market: favorable outlook
Exports: shipments growing as we expected
EXPORTS GREW 10% YOY IN 2007
GLOBAL IRON MARKET WILL REMAIN TIGHT IN THE MID-TERM
Ferrexpo: the only non-integrated local player
FERREXPO NEEDS SECURE CONSUMERS IN THE LONG RUN
METINVEST, EVRAZ, ARCELOR MITTAL: SHIPMENTS ARE SPOKEN FOR
Demand strong for DRI pellets
Price outlook: bullish in the mid-term
Global prices to stay around historical high
Local pricing system has been changed
LONG-TERM CONTRACTS COME TO UKRAINE
PRICE FORECASTS

3. Financial performance
The numbers misrepresent reality
ONLY FERREXPO, PIVDENNY IRON ORE REPORT RELIABLE FINANCIALS
WHAT IS THE TRUE PROFITABILITY OF UKRANIAN IRON ORE BUSINESS?

4. Company Profiles
Ferrexpo (FXPO LN)
Quest for strategic partner presents risks for minorities
Key forecasts
Key forecasts: looking at life without Yeristovksoe pit
DCF Valuation (Scenario 1)
DCF Valuation (Scenario 2)
Key forecasts
DCF Valuation
Key forecasts
DCF Valuation
Key forecasts
DCF Valuation
Key forecasts
DCF Valuation (Non-transparent business)
DCF Valuation (True business)

5. Appendices
Appendix A: Adjustment of financials
TRANSFER PRICING (UNDERREPORTED SALES)
A MIX OF NON-RELATED SALES AND TRANSFER PRICING
ADJUSTED PRODUCTION COST
Appendix B: M&A in iron ore will spur steel consolidation
TRADABLE SINTER FEED DEFICIT IN UKRAINE BY 2012?
Appendix C: Ferrexpo iron ore deposits
Appendix D: Comparative valuation
Appendix E: Key peer financials
Appendix F: Global iron ore projects
Appendix G: What is iron ore?
Appendix H: Iron ore processing scheme
Disclosures

CHARTS

EV/S vs. EBITDA margin
Average market multiples, ‘08E
Pivnichny Iron Ore (SELL; downside 30.7%)
Centralny Iron Ore (SELL; downside 22.2%)
Pivdenny Iron Ore (HOLD; upside 0.7%)
Sukha Balka (SELL; downside 40.2%)
Poltava Iron Ore (SELL; downside 28.9%)
Ferrexpo (HOLD; downside -3.4%)
Ferrexpo. Stock performance. Spread, %. Monthly trading volumes, USD mln
Poltava Iron Ore. Stock performance. Spread, %. Monthly trading volumes, USD mln
Pivdenny Iron Ore. Stock performance. Spread, %. Monthly trading volumes, USD mln
Pivnichny Iron Ore. Stock performance. Spread, %. Monthly trading volumes, USD mln
Centralny Iron Ore. Stock performance. Spread, %. Monthly trading volumes, USD mln
Sukha Balka. Stock performance. Spread, %. Monthly trading volumes, USD mln
Ukrainian iron ore sector
Stock price performance Jan 07- Feb 08, %
Stock price performance YTD, %
Trading on PFTS by stock, %
Monthly average spread by stock, %
Sinter feed production breakdown
Tradable sinter feed breakdown
PRODUCTION FORECASTS & INVESTMENT PLANS
Ukrainian iron ore supply, mln mt
Local demand for iron ore, mln mt
Ukrainian iron ore export breakdown, mln mt
Sinter feed by producer
Sinter feed by country
Pellets by producer
Pellets by country
Global iron ore seaborne trade, mln mt
Iron ore supply to China, %
Ukrainian scrap deficit
Ukrainian export duty for scrap, EUR/mt
Ukrainian iron ore prices, USD/mt (EXW)
Diff. between local and export prices, %
Iron ore price forecasts, USD/mt
EBITDA margin comparison, %
Ferrexpo EBITDA margin by region in 1H07
Ferrexpo. Sales forecasts, USD mln. Scenario 1
Ferrexpo. Sales forecasts, USD mln. Scenario 2
Profitability forecasts
DCF Valuation (Scenario 1)
DCF Valuation (Scenario 2)
Valuation results, USD per share
Sales forecasts, USD mln
Profitability forecasts
Valuation results, USD per share
Sales breakdown, USD mln
Profitability forecasts
Underreported sales
Pivnichny Iron Ore
Centralny Iron Ore
Reported COGS/Output, USD/mt
Ukrainian average production cost of iron ore, USD/mt (EXW)
Ukrainian production cost breakdown by input
Balancing domestic sinter feed market in 2012
Ukrainian export and import of sinter feed
What is iron ore?


TABLES

Planned investments, USD mln
Import barriers to Ukraine
Metinvest’s local contracts, mln mt
Revenues, USD mln
EBITDA margin, %
Net margin, %
Earnings quality by company
Reported vs. true financials, USD mln
Ferrexpo. Key forecasts
DCF output, UAH mln, as of March 05
Sensitivity analysis
DCF output, UAH mln, as of March 05
Sensitivity analysis
Income Statement Summary, USD mln
Balance Sheet Summary, USD mln
Key forecasts
DCF output, UAH mln, as of March 05
Sensitivity analysis
DCF output, UAH mln, as of March 05
Sensitivity analysis
Income Statement Summary, USD mln
Balance Sheet Summary, USD mln
Forecast revision
DCF output, UAH mln, as of March 05
Sensitivity analysis
Factors influencing domestic supply by business group
Comparative valuation
Appendix E: Key peer financials
Global iron ore projects

 





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