2015

Dmitry Glushakov, CFA

+7(499) 681-2918
[email protected]

Designed for printing on A4 paper, double-sided, with flip on long edge. Do not shrink.

Disclosures
The target prices and ratings of the companies/securities mentioned in this presentation refer to the Bloomberg tickers as shown below.
Any company/security which is mentioned in this presentation may be referred to by its name, the full Bloomberg ticker or its ticker
without the stock exchange symbol.

Company/Security name
Severstal
NLMK
MMK
Evraz

Bloomberg ticker
SVST LI
NLMK LI
MMK LI
EVR LN

Rating
O/W
O/W
O/W
O/W

Curncy
US$/GDR
US$/GDR
US$/GDR
GBp/sh

Target price
12,0
16,0
5,9
230

RESEARCH DEPARTMENT [email protected]

The contents of this document have been prepared by Jason Hurwitz of OJSC Alfa Bank ("Alfa Bank") as Investment Research within
the meaning of Article 24 of Commission Directive 2006/73/EC implementing the Markets in Financial Instruments Directive
(2004/39/EC). Please refer to the further important information in relation to this Document located on the last page. Note that the
recommendations contained in this document in relation to SBER, SBERP, VTB, VZRZ, BSPB, KKB, HSBK differ materially from
recommendations issued by Alfa Bank and distributed by Alfa Capital Markets in the 12 months preceding the publication of this
document. www.alfa-bank.com


2. HRC FOB

1. ,CFR
43% 12
170

0%

700

150

-10%

600

130

-20%

500

110

-30%

400

90

-40%

70

-50%

330

$300/t

310

Jan-13

Jan-14

Iron ore fines (62%), CFR China

-60%
Jan-15

250

230

300

210

200

Spread, US$/t

2012-13A =$260/t

270

190
100

170

0
Jan-12

Jan-13

150
Jan-15

Jan-14

YTD change, %

3. 2014
50% 2013

HRC, FOB

4. HRC FOB
HRC FOB
300

10 000

650

250

8 000

600

200

6 000

550

150

US$/t

700

4 000
2 000

500

$70/t

450
2012-13A = -$10/t

$10/t

400

Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14

kt

12 000

Chinese monthly steel export, kt

350

100
50

Spread, US$/t

50
Jan-12

$250/t

US$/t

US$/t

290

0
-50

300
Jan-12

Jan-13
HRC, FOB

Jan-14

-100
Jan-15
HRC, FOB


5.
2012-112014
%

1 800
1 600
1 400
1 200
1 000
800
600
400
200
0

Mt

20%

15%
10%
5%

15%
10%

2 000

5%

1 500

0%

-5%

0%
1 000

-10%

-5%

500

-10%

-15%

-15%
-20%

, %

650
600
500

13% RUB

300
Jan-12

Jan-13

100

400

2012-13A = $50/t

Jan-14

HRC, , EXW
HRC, , FOB

Jan-15

0
Jan-12

50

$50/t

$7/t

200
54% RUB

350

150

600
US$/t

550

400

, %

800

700

450

8. Rebar premium
Rebar discount

7. HRC

US$/t

2 500

Jan-13

HRC,

Jan-14

Spread, US$/t

Mt

6.
2012-112014

-50

-100
Jan-15

Rebar,

 (1)
BENCHMARK
Iron ore fines (62%), CFR China
Hard coking coal, FOB Australia
Basket price
(+) China FOB, HRC-Basket premium
HRC, FOB China
(+) HRC FOB, Russia-China premium
HRC, Russia FOB
(+) domestic price premium
(-) transportation
HRC, Russia domestic EXW
(+) Rebar-HRC premium
Rebar, Russia domestic EXW

2014E
95
115
221
286
507
24
530
-16
30
485
17
501

2015E
OLD

y/y

2015E
NEW

95
0%
125
9%
227
3%
270 -5%
497
-2%
13 -45%
510
-4%
20
30
0%
500
3%
40 137%
540
8%

70
110
178
260
438
2
440
-20
30
390
10
400

y/y

2015E
NEW vs OLD

-26%
-4%
-19%
-9%
-14%
-92%
-17%

-26%
-12%
-22%
-4%
-12%
-85%
-14%

0%
-20%
-41%
-20%

0%
-22%
-75%
-26%

 (2)
Benchmark bulks (US$/t)
Coking coal, FOB Australia

Iron ore 62% fines, CFR China

New
Old
Change
New
Old
Change

Regional steel (US$/t)

Slab, fob Russia

Billet, fob Russia

HRC, fob Russia

CRC, fob Russia

HRC, Russia dom.

CRC, Russia dom.

Galvanised, Russia dom.

Rebar, Russia dom.

New
Old
Change
New
Old
Change
New
Old
Change
New
Old
Change
New
Old
Change
New
Old
Change
New
Old
Change
New
Old
Change

2011A
306
306
0%
169
169
0%
2011A
620
620
0%
645
645
0%
700
700
0%
800
800
0%
700
700
0%
870
870
0%
1 020
1 020
0%
700
700
0%

2012A
197
197
0%
131
131
0%
2012E
520
520
0%
572
572
0%
580
580
0%
670
670
0%
560
560
0%
680
680
0%
960
960
0%
640
640
0%

2013A
151
151
0%
138
138
0%
2013E
490
490
0%
516
516
0%
550
550
0%
620
620
0%
520
520
0%
600
600
0%
820
820
0%
560
560
0%

2014E
115
116
-1%
95
102
-7%
2014E
490
500
-2%
485
510
-5%
530
540
-2%
600
600
0%
480
510
-6%
540
570
-5%
730
770
-5%
500
550
-9%

2015E
110
125
-12%
70
95
-26%
2015E
390
480
-19%
391
479
-18%
440
510
-14%
520
560
-7%
390
500
-22%
440
560
-21%
610
770
-21%
400
540
-26%

2016E
115
135
-15%
70
95
-26%
2015E
400
490
-18%
398
493
-19%
450
530
-15%
530
580
-9%
430
510
-16%
480
580
-17%
660
790
-16%
440
550
-20%

3Q'14A 4Q'14A 1Q'15E 2Q'15E 3Q'15E 4Q'15E

113
112
110
110
110
110
115
115
NA
NA
NA
NA
-2%
-3%
NA
NA
NA
NA
90
74
70
70
70
70
95
95
NA
NA
NA
NA
-5%
-22%
NA
NA
NA
NA
3Q'14A 4Q'14A 1Q'15E 2Q'15E 3Q'15E 4Q'15E
480
440
380
390
400
400
500
500
NA
NA
NA
NA
-4%
-12%
NA
NA
NA
NA
501
439
378
388
398
398
527
512
NA
NA
NA
NA
-5%
-14%
NA
NA
NA
NA
550
490
440
440
440
440
530
530
NA
NA
NA
NA
4%
-8%
NA
NA
NA
NA
610
570
520
520
520
520
590
590
NA
NA
NA
NA
3%
-3%
NA
NA
NA
NA
520
420
360
380
400
420
520
520
NA
NA
NA
NA
0%
-19%
NA
NA
NA
NA
570
470
390
430
450
470
580
580
NA
NA
NA
NA
-2%
-19%
NA
NA
NA
NA
800
610
550
610
630
650
780
780
NA
NA
NA
NA
3%
-22%
NA
NA
NA
NA
570
420
360
400
440
420
610
570
NA
NA
NA
NA
-7%
-26%
NA
NA
NA
NA

=
120%

100%
EBITDA
margin
~ 22%
80%

85%

60%

40%

78%

20%

2)
15%

0%

90%

85%

4)

EBITDA
2015

2015

2014

100%

3)
,

1) ~15%

EBITDA
margin
~ 27%

59%

2015

9. EBITDA margin

10.
32014/42014
70%

65%

60%

55%
50%

50%

45%
40%

40%

35%

30%
20%

,

,
,

16%

16%

10%
0%
% SVST

%
NLMK

3Q14

% MMK

%
EVRAZ

4Q14



1.
RUB/USD
RUB/USD
EBITDA
Severstal
NLMK
Evraz
MMK

45
1 462
1 834
953
933

50
1
2
1
1

807
089
565
156

55
2
2
2
1

089
298
065
338

60
BASE
2 325
2 472
2 482
1 490

65
2
2
2
1

524
619
835
618

70
2
2
3
1

695
745
137
729

EV/EBITDA
Severstal
NLMK
Evraz
MMK

5.7
4.7
9.5
4.3

4.5
4.0
5.4
3.3

3.9
3.6
4.0
2.7

3.4
3.3
3.2
2.4

3.1
3.1
2.7
2.1

2.9
2.9
2.4
1.9

FCFE yield
Severstal
NLMK
Evraz
MMK

5%
12%
-8%
9%

9%
15%
9%
18%

13%
18%
21%
25%

16%
20%
31%
32%

18%
22%
39%
37%

20%
24%
46%
41%

Div yield
Severstal
NLMK
Evraz
MMK

4%
6%
-3%
4%

6%
8%
1%
4%

8%
9%
4%
5%

10%
10%
7%
6%

11%
11%
9%
6%

12%
12%
11%
7%

 ()

11.
2008-2009

12.
2008-2009

-9%

70%
50%

-5%

-
2008

40%

-10%

+3%

2009

30%

37%

-20%

, %

80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
-100%

-9%
60.0
50.0
mt

mt

70.0
45
40
35
30
25
20
15
10
5
0

40.0

-30%

30.0
20.0
10.0
0.0

2008

2009

10

 ()

2.

25%

50%

25%

25%

20%

? (FCF)

11


RATING
TP/upside

FORECASTS
Revenue
EBITDA
margin
Net income
EPS
DPS
FCFE
Net debt, YE
VALUATIONS
EV/EBITDA
P/E
FCFE yield
dividend yield
Net debt/EBITDA

US$m
US$m
%
US$m
US$/sh*
US$/sh*
US$m
US$m
x
x
%
%
x

Severstal

NLMK

MMK

Evraz

OVERWEIGHT

OVERWEIGHT

OVERWEIGHT

OVERWEIGHT

12

29%

16

29%

5.3

108%

230

34%

2014E
10 388
2 268
22%
-468
-0.58
1.72
3 710
1 172
2014E
3.8x
-16.1x
49%
18%
0.5x

2015E
7 074
2 325
33%
1 425
1.76
0.85
1 136
727
2015E
3.6x
5.3x
15%
9%
0.3x

2014E
10 229
2 239
22%
963
1.61
0.47
1 818
1 950
2014E
4.2x
7.7x
24%
4%
0.9x

2015E
8 676
2 472
28%
1 353
2.26
1.14
1 346
1 642
2015E
3.7x
5.5x
18%
9%
0.7x

2014E
7 791
1 540
20%
242
0.28
0.18
877
2 300
2014E
2.4x
9.0x
40%
7%
1.5x

2015E
5 895
1 490
25%
535
0.63
0.14
659
1 760
2015E
2.4x
4.1x
30%
5%
1.2x

2014E
13 070
2 148
16%
342
0.23
0.07
685
5 464
2014E
4.4x
11.6x
17%
0%
2.5x

2015E
11 049
2 482
22%
912
0.62
0.15
1 016
4 676
2015E
3.5x
4.3x
26%
0%
1.9x

12

Disclosures

IMPORTANT INFORMATION

The contents of this document have been prepared by Open Joint Stock Company Alfa Bank ("Alfa Bank"), as Investment Research within the meaning of Article 24 of Commission Directive 2006/73/EC implementing
the Markets in Financial Instruments Directive 2004/39/EC ("MiFID"). Alfa Capital Markets ("ACM") is distributing this document to its clients in the EEA and accepts no responsibility towards any other classes of
recipient. Alfa Bank and ACM have in place appropriate conflicts of interest policies and procedures aimed at ensuring the objectivity of the information contained in this document. The information contained in this
document is provided for information purposes only and is not a marketing communication, investment advice or personal recommendation within the meaning of MiFID. The information must not be used or
considered as an offer or solicitation of an offer to sell or to buy or subscribe for any securities or financial instruments. In the UK, this document does not constitute a Financial Promotion within the meaning of section
21 of the Financial Services and Markets Act 2000 (as amended). ACM is regulated by the Financial Services Authority (FSA) with FSA registration number 416251, for the conduct of UK investment business and is
the trading name of the UK branch of Alfa Capital Holdings (Cyprus) Limited (ACC), which is authorized by the Cyprus Securities and Exchange Commission under license number CIF 025/04. This document is not
for distribution to retail clients as defined by MiFID and may not be communicated to such persons. This document is not for distribution or use by any person or entity in any jurisdiction where such distribution or use
would be contrary to local law or regulation or which would subject Alfa Bank, ACC , ACM or any other group entity to authorization, licensing or other registration requirements under applicable laws. The information
contained in this document is the exclusive property of Alfa Bank. Unauthorized duplication, replication or dissemination of this document, in whole or in part, without the express written consent of Alfa Bank is strictly
prohibited. Although the information in this document has been obtained from, and is based on, sources Alfa Bank believes to be reliable, no representation or warranty, express or implied, is made by Alfa Bank, ACM
or the authors. ACM and its officers and employees do not accept any responsibility as to the accurateness or completeness of any information herein or as to whether any material facts have been omitted. All
information stated herein is subject to change without notice. ACM makes no warranty or representation that any securities referred to herein are suitable for all recipients and any recipients considering investment
decisions should seek appropriate independent advice. Nothing in this document constitutes tax, legal or accounting advice. Alfa Bank, ACC and their associated companies, officers, directors or employees (excluding
any financial analysts or other personnel involved in the production of research), from time to time, may deal in, hold or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to
the securities, financial instruments and companies mentioned in this email, or may have been, or may be represented on the board of such companies. If such circumstances arise, ACM, Alfa Bank, ACC and their
associated companies have in place appropriate conflicts of interest policies and procedures to ensure that investment research remains independent and objective. A summary of ACC's conflicts of interests policy
(which also covers ACM), containing details relevant to investment research, is available upon request from ACC or ACM. ACC and ACM have arranged for Alfa Bank and other relevant group entities involved in the
production of research to implement equivalent policies. This document is distributed in the United States by Alforma Capital Markets, Inc., a subsidiary of Alfa Bank, which accepts responsibility for its contents.
Alforma Capital Markets, Inc. did not contribute to the preparation of this report and the authors are neither employed by, nor are associated persons of, Alforma Capital Markets, Inc. The issuing entity and authors
may not be subject to all of the disclosures and other US regulatory requirements to which Alforma Capital Markets, Inc. and its employees are subject. Any US person receiving this report who wishes to effect
transactions in any securities referred to herein should contact Alforma Capital Markets, Inc., not its affiliates. Alfa Bank is incorporated, focused and based in the Russian Federation and is not affiliated with
US-based Alfa Insurance.

13