Norilsk Nickel: net income growth is 330%

Net income in Q406 climbed 4.3-fold to $3 bn on the same period in 2005 ($720 mn) and by 110.8% compared with earnings in Q306, which totaled $1.6 mn. The surge in net income is attributable above all to the higher prices for nonferrous metals such as nickel, copper, and platinoids, as well as a substantial increase in other earnings related to the revaluation of financial investments in securities. In Antanta Capital’s analysts opinion, it was particularly the latter factor that proved decisive, given that in Q4 alone the price of shares in power utilities such as UES, TGC-1, TGC-14, a number of trunk grid companies, etc. (and it is namely these that concern us here) skyrocketed.

According analyst’s forecasts, Norilsk Nickel’s net income for 2006 totaled $7.8 bn. This implies that the company’s P/E multiple is 4 at most, which is relatively low compared with global peers. Therefore, the miner’s shares remain an appealing equity option for many investors, particularly in light of the forthcoming restructuring of the company, as part of which every one of Norilsk Nickel’s shareholders will receive a stake in the new power utility of Mikhail Prokhorov, one of the main owners of the company, proportional to his or her stake in NorNickel.

The target price of Antanta Capital for Norilsk Nickel’s shares is $220, and the recommendation is Buy.