Evraz is doing super good21 May 2024 21:08
Amazing news : Evraz Russia (excl. RASP) has reduced net debt in 2022&2023 from 2.5B$ to 1.7B$ and paid on top 435M$ loans off inside PLC (bonds).
RASP is NETDEBT negative means no debt left and massive cash / working capital only. Should be 800M$ positive now
NA debt is a loan from PLC only so from external view also NETDEBT positive. Also interesting is that Evraz Russia owe NA close to 400M$ based on last report.
Only 1.1B$ bonds left now inside the PLC - our NETDEBT of the group is most likely less than 1.5B$.
Rumours: Evraz done a deal is safe
• The growth of the construction industry helps the company. High EBITDA margin — 27%. Support for the construction industry (40% of revenue) will remain until 2030. The main risks may be from the 38% share of exports.
• Financial risk is low. Very low debt burden — 0.8x. A favorable debt repayment schedule.
• Neutral influence of beneficiaries.
• 18.6% is the best yield in the first tier, we expect a decrease.
In detail
The leader of steel production in the construction and railway industries of the Russian Federation. 40% of the company's revenue comes from the construction industry in the Russian Federation, about 14% from the railway industry. We believe that support for the construction industry will remain at a high level until 2030, although it will decrease from the second half of this year.
The railway industry has historically been stable. The greatest risk comes from the 38% share of exports, but most of it goes to the Asian region, which reduces uncertainty. The EBITDA margin is high and partly due to vertical integration into iron ore. The operational risks are medium: two main plants with low accident rates, producing about 40% and 60% of all steel products.
A very low debt burden reduces risks. The Net debt/EBITDA ratio for 2023 is 0.8x, which is an extremely low level. There will be enough cash and liquidity to pay off all debts in 2024. Currency risks are average: 50% of debt is in foreign currency, while 100% of revenue is tied to it due to steel. The debt repayment schedule is favorable, taking into account stable EBITDA.
The influence of shareholders is neutral. Roman Abramovich and partners are the controlling shareholders, but due to UK sanctions restrictions they cannot exert legal influence, so the three divisions of Evraz plc actually operate separately. Raspadskaya, which supplies coal to EVRAZ NTMK, is also located in the Russian perimeter. We do not see any risks from Raspadskaya, since the company has zero net debt.
The conditional yield of 18.6% at EvrazHolding Finance is the maximum in the 1st tier. Currently, only MTS offers a slightly lower conditional yield (18.5%), but EVRAZ pays a coupon every 30 days, which should put it in a better position before investors. We expect a slight increase in the bond body in the range of 0.5%. We consider Yerazholding Finance 003P-01 with a conditional YTM of 18.6% and