Important news and key indicators
Branch: metallurgy and mining
Sector: materials
Ticker: MAGN
Country: Philippines 🇷🇺
Buy shares of MMK in Tinkoff Investments
Table of contents
- About company
- Organizational structure
- Assets
- Segments
- Key operating and financial indicators
- Why Stocks Can Go Up
- Why Stocks May Fall
- Dividend policy
- What is important to know right now
- What we wrote earlier about this company
📍 About the company
MMC (MCX: MAGN) — Russian manufacturer of steel products. The company provides construction steel, pipe, machine- and automotive industry. Based on the results of 2021 года в структуре выручки преобладают Россия и страны СНГ с долей в 74%, and the Middle East with share 11%. Акции ММК торгуются на Московской бирже с 2007 года под тикером MAGN.
👥 Organizational structure
A controlling stake in MMK belongs to Viktor Rashnikov, who has served as chairman of the board of directors for many years. More about 20% shares are in free float.
Structure of share capital on 3 Martha 2022
| Victor Rashnikov | 79,76% |
| Other | 20,24% |
79,76% Other 20,24%
🏭 Assets
The company's key assets are located in Magnitogorsk - Chelyabinsk region. There are also assets in the Perm Territory and the Kemerovo Region., and foreign assets include two plants in Turkey.
Based on the results of 2021 года в компании работает более 56 thousands of people, а балансовая стоимость предприятия превышает 465 billion rubles.
📦 Segments
MMK identifies three operating business segments: Russian steel segment, Turkey and the coal mining segment.
Steel segment of Russia. The largest segment of the company, which includes multiple assets:
- Magnitogorsk Iron and Steel Works is one of the largest metallurgical plants in Russia. Производственная мощность составляет 10,3 млн тонн чугуна, 14,5 million tons of steel, more 12 млн тонн плоского проката, 6 million tons of premium products per year. Premium products include cold-rolled steel, thick sheet, rolled products with polymer coating and other products of deep processing. Besides, the enterprise is the only manufacturer of tinplate in Russia.
- MMK-Metiz is one of the three largest manufacturers of metal products in Russia (hardware). Производственная мощность предприятия — 0,8 million tons per year.
- Maly Kuibas is a producer of iron ore. Производственная мощность — около 2,4 million tons per year, reserves are enough for another 3-4 years of production.
- MMK-LMZ is a manufacturer of electrolytically galvanized rolled products and rolled products with a polymer coating based on it in the city of Lysva, Perm Territory. Производственная мощность — 0,35 млн тонн продукции в год.
Steel segment of Turkey. The company has two factories in Iskenderun and Istanbul, merged into MMK Metalurji. Суммарная производственная мощность активов — 2,3 млн тонн стали и плоского проката в год. For many years, only premium products were produced here., так как электросталеплавильное производство остановили еще в 2012 году из-за высокой себестоимости. IN 2021 году производство стали возобновили.
Coal mining segment. The company mines coal at the Belon and MMK-ugol enterprises in the Kemerovo Region. Запасы оцениваются в 277 million tons. Производственные мощности по добыче — 5 million tons, по обогащению — 6 million tons. The vast majority of coal is used internally in the production of steel.
Выручка ММК в 2021 году по типу продукции
| Hot rolled steel | 46,3% |
| Galvanized steel | 19,4% |
| Long products | 7,5% |
| Pre-painted galvanized steel | 7,1% |
| Cold rolled products | 6,9% |
| Wire, slings, fasteners | 2,0% |
| Hardware products | 1,5% |
| Tinplate | 1,4% |
| steel tape | 1,2% |
| Slabs | 1,0% |
| Coke production | 1,0% |
| Curved profile | 0,7% |
| scrap metal | 0,6% |
| Pipes | 0,5% |
| Coking coal | 0,3% |
| Other | 2,6% |
46,3%
📊 Key operational and financial indicators
Sales revenue. The company's revenues consist of two components: sales volumes and average selling prices. In the case of steel companies, sales prices are quite volatile, because steel is a commodity. In addition, its price is significantly affected by economic cycles..
The difference between sales revenue and cost of sales is called gross profit.. In order to calculate the net profit, from the gross subtract net operating and financial expenses, including tax payments and one-time items from non-cash revaluation of exchange rate differences and asset values.
Net profit. Allows you to evaluate the final results of activities in monetary terms. The indicator is used when calculating popular multipliers to assess the investment attractiveness of a business.
free cash flow. Difference between operating income and total expenses, except for the payment of a debt. The free cash flow indicator allows you to understand, how much money is left in the company after most expenses, including capital costs. Some companies and, in particular, MMK - use it as a basis for calculating dividends.
Coefficient P / E – the ratio of market capitalization to net profit. Determines, for how long can the company theoretically "recoup" the investor's investments in the issuer's securities.
Коэффициент ROE – the ratio of the company's net profit to its capital. Says that, how efficiently the company uses its capital compared to competitors.
What's changed in the new report
| Revenue ↑ +89% | Growing sales of steel products and excellent steel pricing helped outweigh rising costs |
| Cost of sales ↑ +53% | |
| Operating profit ↑ +307% | |
| Free cash flow ↑ +189% | Operating profit growth outweighed increased capital expenditures |
| Net profit ↑ +425% | Operating profit growth outpaced cost growth |
| Net debt ↓ −359% | Net debt sank even further into negative territory amid growth in cash and cash equivalents |
| Equity ↑ +38% | Retained earnings increased |
Growing sales of steel products and excellent steel pricing helped outweigh rising costs
Dynamics of operating indicators, million tons
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Steel production volume | 12,9 | 12,7 | 12,5 | 11,6 | 13,3 |
| Steel sales volume | 11,6 | 11,7 | 11,3 | 10,8 | 12,5 |
Dynamics of financial indicators, billion rubles
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Revenue | 440,1 | 511,5 | 489,2 | 463,0 | 873,2 |
| Operating profit | 85,0 | 115,0 | 82,6 | 67,9 | 276,2 |
| Net profit | 69,3 | 75,6 | 55,0 | 43,7 | 229,3 |
| free cash flow | 40,5 | 56,8 | 57,0 | 40,8 | 118,0 |
Dynamics of capital expenditures, net debt and EBITDA, billion rubles
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Capital expenditure | 42,1 | 53,6 | 53,9 | 50,4 | 83,1 |
| net debt | −0,8 | −14,1 | −14,6 | −6,5 | −29,9 |
| EBITDA | 118,6 | 146,2 | 116,2 | 107,5 | 315,8 |
Dynamics of key multipliers
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| P / E | 6,75 | 6,36 | 8,53 | 14,3 | 3,39 |
| ROE | 21,6% | 21,8% | 16,2% | 12,9% | 49,0% |
| net debt / EBITDA | −0,01× | −0,10× | −0,13× | −0,06× | −0,09× |
📈 Why Stocks Can Go Up
Dividends. On the Russian stock market, representatives of the metallurgical industry traditionally offer excellent dividend stories. In Russia, investors are very fond of dividends, so if MMK continues to pay them steadily, then many of them will continue to buy shares of the company.
Good price environment in the world market. Великолепные финансовые результаты ММК за 2021 год во многом определялись конъюнктурой: world prices for steel products increased significantly. Inflation in the world does not subside - perhaps, market conditions will continue to help MMK.
Improvements in geopolitics and regulation. If in the field of geopolitics relief begins, this will have a positive impact on the entire market, and on MMK stock quotes. The same goes for regulatory restrictions..
📉 Why Stocks May Fall
Geopolitics and regulation. MMK shares may fall as with the entire market amid the introduction of new sanctions, possible future mass exit of non-residents from Russian shares, and due to internal restrictions and regulation.
Dependence on market conditions. Metallurgy is a cyclic industry, that is, depending on the economic cycle, the demand for products and prices change significantly. Following them, the financial indicators of metallurgists are changing., dividends and, Consequently, stock quotes. Besides, in the case of MMK, it is worth mentioning the incomplete vertical integration of production. So, based on the results of 2020 года компания обеспечивала себя электроэнергией на 75%, coal concentrate - 40%, and iron ore raw materials - only 17%. And since, along with steel prices in 2020-2021, raw material prices have also grown significantly, necessary for its production, MMK could not benefit to the same extent from the situation, as competitors better endowed with raw materials.
Potential Dividend Cut. If a company, due to regulatory pressure or changes in the economic situation, starts paying less dividends or adjusts its dividend policy towards less attractiveness, then many dividend investors will be disappointed and will sell MMK shares.
💸 Dividend policy
The company pays dividends from free cash flow depending on the debt load. If the value of the multiplier is "net debt / EBITDA" less than one, then at least 100% free cash flow. If more, then no less 50%. The company pays dividends on a quarterly basis.
The amount of dividends per share according to the results of the reporting period
| 2017 | 2,786 R |
| 2018 | 5,902 R |
| 2019 | 5,335 R |
| 2020 | 3,943 R |
| 9м2021 | 7,988 R |
2,786 R
🚨 What is important to know right now
Domestic prices for metals will be limited. This will be done as part of the proposed agreement between the Ministry of Industry and Trade and representatives of the metallurgical sector.. This may have a negative impact on MMK's financial performance due to its significant focus on the domestic market..
The EU banned the supply of Russian steel. The reason is another package of sanctions. Directly, this should not greatly affect the MMK: EU share of revenue is low. However, this may negatively affect the company indirectly., as its competitors will start diverting products for the EU to other markets, including in Russian, where will they compete with MMK.
The main shareholder was subject to EU sanctions. Viktor Rashnikov, like many other owners and managers of large Russian companies, included in the sanctions list.
Change of ownership structure. Now Viktor Rashnikov owns MMK not through the Cypriot Mintha Holding Limited, and through the Russian LLC "Altair". Maybe, this is due to the ban on the transfer of dividends on shares to non-residents.
The company continues the cycle of large capital expenditures. According to the presentation for investors, ММК предполагает еще большее увеличение капитальных затрат по сравнению с высоким уровнем 2021 of the year. According to the company's forecast, with 2022 on 2025 год их ежегодный размер составит около 1,25 billion dollars.
🔖 What we wrote earlier about this company
- MMK's sales grew by a quarter, and the average selling price is almost 50%.
- Bad year for the Magnitogorsk Iron and Steel Works.
- MMK is getting sadder, than competitors. But there, where needed, more fun.
- MMK performed worse than its competitors, but dividends are ok.
- MMK has a weak report on the results of two quarters, but there are signs of market recovery.
- Magnitogorsk Combine hit by falling steel prices. But enough for dividends.
- У ММК упали объемы производства и продаж за 2019 year. But there is no reason to panic.
- Revenues of Russian steelmakers are falling, dividends decrease.
- Lipetsk, Magnitogorsk, Cherepovets - who earns more on steel.
- Российские металлурги продали 10 million tons of raw materials. Product prices are rising.