OREANDA-NEWS. September 02, 2010. PM Putin held a meeting in Norilsk concerning social and economic development of the city and the situation with Norilsk Nickel.  Putin demanded a reduction of pollution, suggested increasing the fixed part of employees’ salaries from 60% to 70%, and said that nickel and copper export duties should be reinstalled and should be linked to metal prices. He suggested that the company and government  find a mutually acceptable solution on the duties issue. Meanwhile, the PM said that the government is not planning to intervene in Norilsk’s management dispute, though he was critical of the high dividends paid for last year.  Later, Norilsk Nickel signed a new agreement with the Inspection Service for Natural Resources, to halve sulfur dioxide emissions by 2015, reported the press-centre of OTKRITIE Financial Corporation.

View: If changes are implemented along the lines of Putin’s suggestions, there will be a negative impact on the company’s financials. However, the export duties theme is not new for the market. On our current estimates and on an assumption that the export duty will be 10% for nickel and for copper (and linked to metal prices), 2011E EBITDA could be underperform our forecast by c5%. We view this news as somewhat negative for the stock.

Valuation and Action: We continue to favor Norilsk, and reiterate our BUY rating and a TP of USD220. The stock trades on a 2011E EV/EBITDA of 4.6x, vs. 5.4x for global peers.