Financial group BKS has raised target price for shares of ALROSA by 33% to 59 rubles per share, according to a survey by analysts Oleg Petropavlovsky and Kirill Chujko cited by Finmarket.ru.
In addition BKS analysts upgraded recommendation on these securities from Hold to Buy.
“We have revised our valuation model in respect of ALROSA, in order to exclude the natural gas assets (expecting their disposal with 10% discount from $1.38 billion), taking into account reduction of stocks (from 18 to 11 million carats by 2017) and adjusted capex forecasts amid depreciation of ruble,”- the analysts said in the review.
It is noted that the most significant changes in the valuation model for the company were made following inclusion of a lower ruble exchange rate.
“95% of ALROSA’s revenue is denominated in U.S. dollars and 80% of its costs are borne in the national currency. We believe that the company feels confident amid the rate of 36 rubles per dollar. As a result of the above changes we anticipate that ALROSA’s cash flow will be 6% in 2014 (the period of the highest capex) and 10% in 2015,” - the report says.
BKS analysts believe that ALROSA’s shares are a virtually risk-free investment as prices for diamonds are not expected to decline. In addition, experts emphasize that Europe and the U.S. are not likely to impose sanctions on such dominant market player as ALROSA, which accounts for nearly 30% of the global diamond output and roughly 20% of the total imports of Europe.
According to the information terminal EFIR-Interfax, the consensus forecast of ALROSA’s shares based on analysts' estimates of 10 investment banks is 47.65 rubles per share, with the consensus recommendation "Buy".
The current market value of ALROSA’s shares is about 35 rubles per unit.
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