OREANDA-NEWS. October 05, 2010. Mechel is due to release its 1H10 financial results on Tuesday, 5 October. A follow-up conference call will take place the same day at 6 pm Moscow time. To access the conference call, please dial +44 203 003 2666, reported the press-centre of OTKRITIE Financial Corporation.

As with all the other Russian steel producers, we expect strong results from Mechel as a result of both volume and price growth QoQ. Mechel’s markets have demonstrated positive dynamics in 2Q10. According to the company’s operating results, coking coal concentrate production increased by 29%, output of coal for steel production rose by 111%, growth in steel output totaled 7%, and hardware production grew by 21% on a QoQ basis.

For 2Q10, we expect the company to post a revenue of USD 2.44bn (+27.5%), with EBITDA of USD 560m (+109% QoQ), which implies a 23% EBITDA margin. We assume that the net income of the company was affected by several one-off items and by a loss from ruble depreciation. Our estimate for Mechel’s net income is USD 104m, which represents a 4% net margin.

Valuation: We reiterate our BUY rating for Mechel as we believe the company is well positioned to benefit from high coking coal prices as well as from a pickup in steel prices, which we expect to continue. The stock trades on a 2011 EV/EBITDA of 4.7x vs. 5.5x for its international peers.