Undervalued Russian Company

RusHydro traded just half its equity

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Stock: RusHydro PJSC ADR RG2A, Federal Hydro-Generating Company RusHydro PAO (RSHYY.PK)

RusHydro, a €4.6 billion Russian renewable sources energy producer, traded at half its book value while having also having attractively delivered a trailing dividend yield of 6.1%.

According to its filings, RusHydro operated in the hydropower industry since 2004 and now produces 12.95% of Russia’s electricity.

Income statement
In its recent six months of operations, RusHydro delivered 3.7% revenue decline and an unattractive 17.5% drop in profits. Profit dropped more secondary to the company’s increased financing costs in the period.

In the past three years, RusHydro averaged 6.05% revenue growth and 26.7% profit growth.

Balance sheet
From December, RusHydro increased its debt by ₽82 billion leading to a debt-equity ratio of 0.23x (vs. 0.13x in December). Shareholder equity, meanwhile, increased by ₽47 billion to ₽694 billion.

Cash flow
In its recent six months of operations, RusHydro generated a healthy ₽5.9 billion in free cash flow, while having raised ₽7.4 billion in financing activities (net repayments including dividends).

In the past three years, RusHydro reduced its overall debt by ₽9.3 billion (net issuances) and provided ₽25 billion in dividends despite having generated a hefty free cash outflow of nearly ₽20 billion in the period.

Nonetheless, analysts have an average overweight recommendation on RusHydro’s ADR shares (RSHYY) with a target price of $1.86 (vs. $1.34 at the time of writing), or a possible 38.8% upside.

Applying a 35% discount on its equity and a 10-year growth rate at its outstanding shares resulted in a per share figure of $1.87.

Disclosure: I have shares in RusHydro.

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