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Czech markets  |  January 18, 2013 07:48:01

NWR: Stocks that pay off hold

NWR is left on its recommendation to "hold" with a one-year target price of CZK 94 per share calculated on a discounted cash flow model. Approximately 11% decline in stock prices triggered by weak volumes in 4Q2012 and carefully view the near term sent the shares to authorized levels.

NWR's shares are now trading slightly above 8 times the expected EV / EBITDA for 2013, which we consider reasonable times for probable earnings base this year.

The results of the year could land on the bottom

NWR financial results are still under pressure and the bottom about to see in 1Q2013. Our estimates are 25% below consensus for EBITDA for 2013, because we expect a gradual increase in the benchmark price of hard coking coal at an average of 185 EUR / t We have also included in estimates 5% discount prices NWR compared with benchmarks due to weak local steel market.

Price of black coal in Central Europe in 2013, dropping a double-digit pace for the new brown coal capacity and weak demand for electricity. However, in 2014 we expect a relatively quick recovery due to the high cost of mining in the Silesian basin. Weak macroeconomic environment is partially offset by cost control in hard NWR and debilitating crown against the euro.

NWR over the next two years, reach a negative cash flow, a noticeable improvement comes after the completion of development projects in 2016. NWR has a good maturity debt and large cash cushion (€ 444 million in 3Q2012). Its cash flow is also supported by significant investment slashing costs in 2013 by 30-50%, and control of operating costs. Investors can concentrate mainly on business NWR.

What is the current stock valuation NWR, can be found on the web Investment

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