Buyback continues – dividends are rising. In addition to 95rub/share, paid to Lukoil as a dividend for 9M2018, we expect that for the rest of 2018 the company will pay 151rub/share. In addition to the growth of net profit, from which, according to our expectations, about 30% will be paid, due to the reduction in the number of shares from 850.6mn units to 750mn units, we expect the total dividend for 2018 to be 246 rub/share. We note dividends as a short-term growth factor for stocks, while maintaining optimism about further dividend growth due to the ongoing buyback program (until 2022).
Sales will increase due to higher export prices. We calculated our forecasts for 2018 based on the average oil price of $69/bbl, while the actual price for 2018 was slightly higher - $71.69/bbl (+ 32% yoy), which also gives reason to expect stronger results on the basis of 2018, given the relatively successful operating performance of the company. In the long term, we expect revenues in the range of 7,641bn-8,090bn rubles, which exceeds our previous estimate of 6,531- 7,551bn rubles. A more positive approach to forecasting is based on strengthening our expectations for the Upstream segment, where for 9M2018 we see a rather strong increase in EBITDA by 72% yoy, caused by an increase in profit in Russia by 67% yoy. In addition, we see progress in the export sales of petroleum products, revenues from which in the 9M2018 increased by 29% yoy due to a rise in prices by 38% yoy.
Buy recommendation with 12M TP 6792 rub/share. The decrease in capital expenditure projections by an average of 26% and a more optimistic approach to forecasting revenues are reflected in the increase in the target price from the previous 5296rub/share to 6,792rub/share. Increasing the discount rate from 15.4% to 16.5%. It was compensated by a decrease in the number of shares from 850.6mn to 750mn. Despite the historical maximum value of Lukoil’s shares of 5467rubles/share, we recommend to “Buy”, noting cash flow stability, high probability of improving dividend attractiveness and sufficiency of projects with strong returns.
