The main risk to TMK's financial performance is new competitors in the most profitable segment - the production of seamless pipes

21.08.2024       

TMK's financial performance in the second half of the year will directly depend on the production volume of seamless pipes and large-diameter pipes, says Dmitry Sergeev, chief investment consultant at Veles Capital. As Vedomosti wrote, according to the Metals & Mining Intelligence agency, LDP production in Russia in the first quarter of 2024 alone fell by a quarter to 480,000 tons (see publication dated June 4). Capacity utilization at Russian pipe plants was about 50%. According to Rosstat, in the first half of 2024, the output of steel pipes of all categories decreased by 3% to 6.4 million tons.
If TMK's production results remain at the level of the first half of 2024, the company's revenue for the entire year could amount to about 550 billion rubles, Sergeev predicts. Based on the results of 2023, revenue amounted to 544.3 billion rubles.
The announced indexation of pipe prices in the second half of the year could also have a positive effect on the company's annual result, the analyst says. However, he does not expect TMK's profitability to improve due to rising inflation. According to Sergeev, the company's gross profit in 2024 will amount to about 120 billion rubles. "Net profit will depend on a reduction in the debt burden, which should help reduce interest payments," the expert notes.
The main risk to TMK's financial performance is new competitors in the most marginal segment - production of seamless pipes, which could take up to 15% of the market from the company, says BCS World of Investments analyst Akhmed Aliyev. According to his estimates, TMK currently controls about 90% of this market. However, two large pipe producers – United Metallurgical Company and Zagorsk Pipe Plant – previously announced new projects in this segment. According to BCS estimates, these projects could increase seamless pipe production capacity in Russia by 30% by 2024–2025.
During trading on the Moscow Exchange on August 13, TMK shares lost about 3% and were trading at 148 rubles per share at 18:30 Moscow time.
Vedomosti