OREANDA-NEWS. September 09, 2010. TNK-BP Holding has released neutral US GAAP financials for 1H10. According to report, TNK-BP increased 1H10 net profit (USD2.74bn) by 20% YoY, EBITDA rose almost 25% YoY to USD 4.4bn, and revenue climbed 50% to USD 19bn., reported the press-centre of OTKRITIE Financial Corporation.

However, the company’s profitability margin declined in 1H10, as its EBITDA margin dipped to 23% (-4.6%), while net income margin declined 3.4% to 14.4%. This reduction was the function of higher export duties and MET rates, which rose by 100% and 65% YoY, respectively. At the end of the reporting period TNK-BP had reduced its net debt by USD 291m to USD 1.46bn. The drop in net debt was due to remaining positive FCF – which was above USD 1bn in 1H10 compared with USD 654m in 1H09.

View: There weas little surprise in these numbers since TNK-BP International (which includes TNK-BP Holding) had already presented its financial results for 1H10 and provided the guidance for TNK-BP Holding’s financials. That being said, we note positive market sentiment on TNK-BP, thanks to its strong financial results and upbeat production prospects. In terms of production activity, we are seeing visible potential growth within Russian and active expansion into international markets.

Valuation and Action: TNK-BP trades on a 2010 EV/EBITDA of 2.5x, which implies a 40% discount to Russian market peers. We reiterate our BUY rating on TNK-BP Holding with a target price of USD 2.52/share.