Metals and Mining
Azovstal has posted an unsurprisingly ugly set of 9M12 financials, given the company’s propensity for transfer pricing coupled with the deterioration in the global steel market in recent months. The company’s net loss for the period was USD 241mn, which exceeds its USD 64mn loss reported in full-year 2011 by almost 4x. Considering the gloomy short-term steel market outlook and the ongoing likelihood of opaque financial reporting by Azovstal, we are revising our financial projections for the company downward. We now expect FY12E EBITDA at negative USD 160mn, down from USD -102mn in FY11, with a return to profit on the EBITDA level only in 2014. Our revised target price for AZST stock of USD 0.068 suggests a 9% downside potential and a SELL recommendation.
