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Silvinit’s financial report for 1Q 2008 showed a considerable rise in all the company’s financials, favored by growth on the worldwide potassium market and an upturn in potassium chloride sales. Given the current favorable conditions, we expect Silvinit to show even stronger financial results in FY 2008, which should positively affect its stock valuations in the mid-term.
In line with the company’s financial report, in 1Q 08, Silvinit increased its revenue, audited to RAS, by 106.4% y-o-y in US dollar terms to USD 405.8 mn. The company’s gross profit rose by 145.5% to USD 315.2 mn, operating profit grew 3.2x to USD 255 mn. In the meantime, the company successfully constrained production cost growth, which went up by just 33% in the reporting period to USD 90.6 mn. As a result, Silvinit’s gross margin advanced from 65.3% to 77.7%, operating margin grew from 40.7% to 62.8%. The company net profit in 1Q rose 3.4x y-o-y to USD 201 mn. This boosted net margin from 30.2% to 49.5%.
Table 1. Silvinit: Key RAS Financials 1Q 2008, USD mn
| Indicator | 1Q2007 | 1Q2008 | 1Q2008/1Q2007 |
|---|
| Revenue | 196.6 | 405.8 | +106.4% | | Cost of production | 68.2 | 90.6 | +33.0% | | Gross profit | 128.4 | 315.2 | +145.5% | | Gross margin | 65.3% | 77.7% | | | Business expenses | 48.5 | 50.7 | +4.5% | | Executive expenses | - | 9.5 | | | Operating profit | 79.9 | 255.0 | +219.1% | | Operating margin | 40.7% | 62.8% | | | EBITDA | 93.9 | 272.7 | +190.4% | | EBITDA margin | 47.8% | 67.2% | | | Net profit | 59.3 | 201.0 | +239.0% | | Net margin | 30.2% | 49.5% | |
Source: company data, Finam estimates
We are upbeat on Silvinit’s financial results for 1Q, which should produce positive impact on the company’s stock valuations. The company managed to considerably improve its financials due to an upturn in prices on the world potassium market and a rise in the company’s sales: potassium chloride production in 1Q grew by 2.3%. Silvinit took the lead over its main rival, Uralkaly, in both financial and operating results. Given the ongoing favorable conditions, we expect Silvinit to show even stronger financial results in FY 2008.
The target price for Silvinit’s common shares (RTS: SILV) is USD 1,812 per share, which implies a 14% upside potential and corresponds to HOLD recommendation. The target price for the company’s preferred shares (RTS: silvp) is USD 1,214, which implies a 35% upside and corresponds to BUY recommendation. Michael Frolov
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Silvinit
Capitalization: $3 952 007 800,00
Common shares:
Price: $455,00
Delta week: 0,6%
Delta month: -9,0%
Delta year: -20,2%
Preferred shares:
Price: $150,00
Delta week: -0,3%
Delta month: -21,5%
Delta year: -59,5%
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0.569
0.073
