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Purchase of shares in GMK NORNIKEL (GMKN) for investment and speculation

PJSC MMC Norilsk Nickel is engaged in exploration, production, processing of ore and nonmetallic minerals, sale of basic and precious metals extracted from ore. The company’s segments include the MMC Group, which includes mining and metallurgical operations, transportation services, energy, repair and maintenance services located on the Taimyr Peninsula; Kola MMC Group, which includes mining and metallurgical operations, energy, geological exploration, located on the Kola Peninsula; Norilsk Nickel Harjavalta, which includes refining operations located in Finland; other metallurgical and geological exploration works located in Russia and abroad, other operations, including trading in metals and other goods, supply chain management, transport services, energy and utilities, research and other activities located in Russia and abroad. GMKN’s production facilities are located on the Taimyr and Kola Peninsulas of the Russian Federation and in Finland.

The company is one of the leaders in the Russian economy and has very attractive multiples – the P / E ratio is 7.55x; the fair value to income ratio EV / Revenue is 3.66x. Dividends for 2021 are projected at 9.4% For each ruble invested, the investor receives 0.103 rubles in the company’s assets. The company generates very high margins at the level of gold mining companies. The forecast for profit and sales is stable with an increase. The financial position of the company is stable, Leverage (Debt / EBITDA) equals 0.69x, which does not cause concern. Norilsk Nickel also has free cash flow of $ 3.8 billion, asset utilization ratio is very high ROA (Net Profit / Asset) 30.1% Due to the increased frequency of accidents, the company will increase capital costs in the coming years, but they will not exceed the average costs in the industry …

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MMC Norilsk Nickel has strong fundamentals. More than 70% of publicly traded companies have a lower set of criteria for growth, profitability, debt and visibility. The company’s strengths include the generated margin, which is one of the highest among the companies traded on the stock exchange. GMKN’s core business is profitable. The low valuation with P / E ratios of 7.78 and 7.31 for the current fiscal year and 2022, respectively, makes the stock quite attractive in terms of earnings multiples. The company is one of the most profitable companies with high dividend expectations. Over the past year, analysts have regularly revised their sales forecast upwards. Over the past year, stock analysts have significantly revised their EPS expectations upward. However, according to analysts, this group is among those enterprises with the lowest growth prospects.

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The company’s shares can be considered by investors for investments with a horizon of 1 – 3 – 5 years. At the moment, after the correction, the company’s shares are actively recovering, remaining in an upward trend, which makes it possible for an investment with a first target at 32,400 and an order to fix losses when they fall below 21,000 rubles. However, in this case, the ratio of profit and risk will not be good enough, therefore, when buying shares of the company here and now, profit taking should be no earlier than the price reaches 37,000 rubles. At the same time, if the ruble strengthens in the current year, the company’s growth may slow down even more. However, investors can count on a good dividend yield during the entire investment period, and taking into account the possible growth of platinum group metals, Norilsk Nickel may receive additional acceleration. Investments are possible up to 5% of the capital. It is better to limit speculations to 1% of the deposit amount. It should also be noted that cautious investors may wait for a buy signal on the weekly timeframe, since such a signal has not yet been generated. Be careful and careful, follow the money management rules

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