NorNickel

Dec-YE

2017

2018

2019E

2020E

2021E

Income statement

Revenue

9,146

11,670

13,277

14,634

14,602

EBITDA

3,995

6,231

7,678

8,626

8,443

EBIT

3,123

5,416

6,933

7,801

7,533

Net interest

-458

-485

-363

-394

-457

Taxation

-721

-843

-1,577

-1,778

-1,698

Minority interest in profit

6

26

-67

-124

-156

Net profit for the year

2,129

3,085

4,927

5,505

5,221

Underlying earnings

2,129

3,085

4,927

5,505

5,221

Underlying EPS, $

1.35

1.95

3.11

3.48

3.30

Thomson Reuters consensus EPS, $

2.73

2.84

2.66

DPS declared, $

1.17

2.11

2.60

3.12

3.28

Thomson Reuters consensus DPS, $

#######

2.31

2.67

2.73

EBIT by division

Russia (GMK & KGMK)

4,217

6,098

7,601

8,354

7,993

EBIT margin

58%

65%

72%

74%

72%

NN Harjavalta

36

47

154

227

237

EBIT margin

4%

5%

14%

18%

18%

Other metallurgical

-140

71

168

311

391

EBIT margin

-99%

62%

37%

46%

47%

Other non-metallurgical

-6

22

6

7

7

EBIT margin

-1%

2%

1%

1%

1%

Other

-757

-772

-996

-1,098

-1,095

Income statement ratios

EBITDA margin

44%

53%

58%

59%

58%

EBIT margin

34%

46%

52%

53%

52%

EPS growth

-17%

45%

60%

12%

-5%

Dividend payout ratio

87%

108%

83%

90%

99%

Dividend as % of EBITDA

46%

54%

54%

57%

61%

Input assumptions

Nickel, $/t

10,404

13,130

12,762

14,805

15,728

Copper, $/t

6,170

6,532

6,400

6,500

7,025

Palladium, $/oz

871

1,030

1,558

1,700

1,576

Platinum, $/oz

950

880

843

900

966

RUB/$

58

63

67

69

68

Unit costs per nickel eq tonne, $

8,399

7,873

7,971

8,454

8,779

Sustaining capex per nickel eq tonne, $

1,221

931

2,420

2,320

2,594

Production volumes*

217

219

223

223

222

Nickel, kt

Copper, kt

401

474

481

494

470

Palladium, koz

2,780

2,728

2,780

2,780

2,780

Platinum, koz

670

653

668

668

668

Attributable Cu eq volumes, kt

1,412

1,478

1,506

1,519

1,492

Volume growth

2%

5%

2%

1%

-2%

Dec-YE

2019E

2020E

2021E

2017

2018

Balance sheet

Net operating assets

13,581

11,062

12,914

14,588

16,189

Financial instruments

267

222

222

222

222

Equity

4,333

3,229

4,042

4,607

4,638

Minority interest

331

250

317

441

598

Net debt

8,201

7,051

7,973

8,908

10,270

Balance sheet ratios

Gearing (net debt/(net debt+equity))

65.4%

68.6%

66.4%

65.9%

68.9%

Net debt to EBITDA

2.1x

1.1x

1.0x

1.0x

1.2x

RoCE

28.1%

44.4%

57.8%

56.7%

49.0%

RoIC (after tax)

21.5%

35.2%

44.5%

43.6%

37.7%

RoE

45.7%

81.6%

135.5%

127.3%

113.0%

Cash flow statement

Operating cash flow

1,339

6,417

5,781

6,721

6,694

Capex

-2,002

-1,553

-2,300

-2,400

-2,500

Other FCF

431

-35

0

0

0

FCF

-232

4,829

3,481

4,321

4,194

Equity shareholders' cash

-667

4,486

3,191

4,005

3,828

Dividends and share buy backs

-3,004

-3,336

-4,114

-4,940

-5,190

Surplus (deficit) cash

-3,671

1,150

-922

-935

-1,362

Cash flow ratios

Working capital days

96

35

39

37

38

Cash Conversion

-0.3x

1.5x

0.6x

0.7x

0.7x

FCF yield

-0.7%

13.5%

8.0%

9.6%

9.0%

Equity shareholders' yield

-2.6%

15.7%

9.0%

11.3%

10.8%

Capex/EBITDA

50.1%

24.9%

30.0%

27.8%

29.6%

Valuation

$mn

$/sh

Russia (GMK & KGMK)

60,807

38.4

Finland

2,262

1.4

Other metallurgical

4,191

2.6

Other non-metallurgical

-90

-0.1

Other

-11,557

-7.3

Total enterprise value

55,613

35.1

Net debt as at 31 December 2018

-7,051

-4.5

Cash used in share buy-backs

-

-

Other investments

222

0.1

Minority interest

-250

-0.2

Equity value as at 27/3/2019

48,534

30.7

Rounded to

31.0

Share price on 26/3/2019

22.4

Expected share price return

38.3%

Plus: expected dividend yield

12.1%

Total implied one-year return

50.4%

Share price range, $:

12-month high on 19/3/2019

22.8

12-month low on 10/4/2018

14.6

Price move since high

-1.8% Price move since low

53.9%

Calculation of discount rate

WACC

9.4%

Cost of debt

5.0%

Risk-free rate

4.0%

Tax rate

24%

Equity risk premium

6.0% After-tax cost of debt

3.8%

Beta

1.30

Debt weighting

30%

Cost of equity

11.8%

Terminal growth rate

2.5%

Valuation ratios

Dec-YE

2017

2018

2019E

2020E

2021E

P/E multiple

12.0x

9.3x

7.2x

6.4x

6.8x

Dividend yield

7.2%

11.7%

11.6%

13.9%

14.6%

EV/EBITDA

8.6x

5.8x

5.7x

5.2x

5.5x

P/B

5.9x

8.8x

8.8x

7.7x

7.6x

NAV per share, $

2.7

2.0

2.6

2.9

2.9