The volume of transportation to the domestic market for 9M2019 amounted to 12.5mn tons of oil (+ 5% yoy) or 38% of the Company's total volume against 37% in 1H2019. About 13.7mn tons (-4%) or 41% fall on export deliveries and 23% (-5%) on transit traffic.
Our view
We assess the results of KTO as expected in the conditions of downward dynamics of oil production in the republic for 9M2019 (-0.5% yoy). In addition, our recommendation takes into account the reduction in the share of oil transported mainly due to lower volumes in mature fields. We maintain our expectations regarding the increase in revenue at the end of 2019 by 5% -6% yoy due to the clarity in tariffs and the level of cargo turnover formed in the framework of our forecasts. At the same time, the uncertainty with the tariffs for the next year still remains high, despite the approval of temporarily compensating tariffs for the period September 2019 - August 2020. The approval of limit tariffs by the regulator for the following periods is expected in the end of November. Our 12M TP T1300/share takes into account the risks of a significant reduction in tariffs and, noting the current undervaluaton of KTO shares (yesterday's close price of T1065/share), we maintain our Buy recommendation.
