Intrinsic value of Mechel ADR - MTL

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$4.53

  Intrinsic Value

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  Value-price divergence*

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$4.53

 
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*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MTL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  9.04
  3.70
  3.83
  3.95
  4.05
  4.15
  4.23
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.63
  4.67
  4.70
  4.73
  4.76
  4.78
  4.80
  4.82
  4.84
  4.86
  4.87
  4.88
  4.90
  4.91
  4.92
  4.92
  4.93
  4.94
Revenue, $m
  4,694
  262,507
  272,561
  283,319
  294,800
  307,026
  320,020
  333,810
  348,425
  363,897
  380,259
  397,548
  415,804
  435,067
  455,383
  476,798
  499,361
  523,127
  548,149
  574,487
  602,202
  631,360
  662,030
  694,284
  728,199
  763,853
  801,333
  840,727
  882,128
  925,634
  971,349
Variable operating expenses, $m
 
  261,378
  271,307
  281,931
  293,269
  305,343
  318,175
  331,794
  346,227
  361,506
  377,664
  392,600
  410,629
  429,653
  449,716
  470,864
  493,147
  516,616
  541,327
  567,337
  594,708
  623,503
  653,791
  685,644
  719,136
  754,347
  791,360
  830,264
  871,149
  914,114
  959,260
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  3,965
  261,378
  271,307
  281,931
  293,269
  305,343
  318,175
  331,794
  346,227
  361,506
  377,664
  392,600
  410,629
  429,653
  449,716
  470,864
  493,147
  516,616
  541,327
  567,337
  594,708
  623,503
  653,791
  685,644
  719,136
  754,347
  791,360
  830,264
  871,149
  914,114
  959,260
Operating income, $m
  729
  1,129
  1,254
  1,388
  1,531
  1,683
  1,845
  2,017
  2,198
  2,391
  2,595
  4,948
  5,175
  5,414
  5,667
  5,934
  6,215
  6,510
  6,822
  7,150
  7,494
  7,857
  8,239
  8,640
  9,063
  9,506
  9,973
  10,463
  10,978
  11,520
  12,089
EBITDA, $m
  962
  16,720
  17,361
  18,046
  18,777
  19,556
  20,384
  21,262
  22,193
  23,178
  24,221
  25,322
  26,485
  27,712
  29,006
  30,370
  31,807
  33,321
  34,914
  36,592
  38,357
  40,215
  42,168
  44,223
  46,383
  48,654
  51,041
  53,550
  56,187
  58,958
  61,870
Interest expense (income), $m
  589
  17,740
  7,573
  7,997
  8,451
  8,935
  9,450
  9,998
  10,580
  11,196
  11,848
  12,538
  13,267
  14,037
  14,850
  15,706
  16,609
  17,561
  18,563
  19,618
  20,729
  21,897
  23,127
  24,420
  25,780
  27,211
  28,714
  30,295
  31,956
  33,702
  35,536
Earnings before tax, $m
  241
  -16,610
  -6,319
  -6,609
  -6,920
  -7,252
  -7,605
  -7,982
  -8,381
  -8,805
  -9,254
  -7,591
  -8,093
  -8,623
  -9,182
  -9,772
  -10,395
  -11,050
  -11,741
  -12,469
  -13,234
  -14,040
  -14,888
  -15,780
  -16,718
  -17,704
  -18,741
  -19,832
  -20,978
  -22,182
  -23,448
Tax expense, $m
  84
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  121
  -16,610
  -6,319
  -6,609
  -6,920
  -7,252
  -7,605
  -7,982
  -8,381
  -8,805
  -9,254
  -7,591
  -8,093
  -8,623
  -9,182
  -9,772
  -10,395
  -11,050
  -11,741
  -12,469
  -13,234
  -14,040
  -14,888
  -15,780
  -16,718
  -17,704
  -18,741
  -19,832
  -20,978
  -22,182
  -23,448

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  32
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  5,536
  351,415
  364,874
  379,276
  394,645
  411,012
  428,407
  446,868
  466,433
  487,144
  509,048
  532,193
  556,631
  582,419
  609,616
  638,283
  668,489
  700,303
  733,800
  769,058
  806,161
  845,195
  886,252
  929,430
  974,831
  1,022,561
  1,072,735
  1,125,471
  1,180,894
  1,239,135
  1,300,333
Adjusted assets (=assets-cash), $m
  5,504
  351,415
  364,874
  379,276
  394,645
  411,012
  428,407
  446,868
  466,433
  487,144
  509,048
  532,193
  556,631
  582,419
  609,616
  638,283
  668,489
  700,303
  733,800
  769,058
  806,161
  845,195
  886,252
  929,430
  974,831
  1,022,561
  1,072,735
  1,125,471
  1,180,894
  1,239,135
  1,300,333
Revenue / Adjusted assets
  0.853
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
  0.747
Average production assets, $m
  4,208
  269,070
  279,375
  290,402
  302,170
  314,701
  328,021
  342,156
  357,136
  372,994
  389,765
  407,487
  426,199
  445,944
  466,767
  488,718
  511,845
  536,205
  561,852
  588,849
  617,257
  647,144
  678,581
  711,641
  746,404
  782,950
  821,366
  861,745
  904,181
  948,775
  995,632
Working capital, $m
  -7,510
  -16,013
  -16,626
  -17,282
  -17,983
  -18,729
  -19,521
  -20,362
  -21,254
  -22,198
  -23,196
  -24,250
  -25,364
  -26,539
  -27,778
  -29,085
  -30,461
  -31,911
  -33,437
  -35,044
  -36,734
  -38,513
  -40,384
  -42,351
  -44,420
  -46,595
  -48,881
  -51,284
  -53,810
  -56,464
  -59,252
Total debt, $m
  8,388
  216,370
  228,483
  241,444
  255,277
  270,007
  285,663
  302,277
  319,885
  338,526
  358,239
  379,070
  401,064
  424,273
  448,750
  474,551
  501,736
  530,369
  560,516
  592,248
  625,641
  660,771
  697,723
  736,583
  777,444
  820,401
  865,558
  913,020
  962,900
  1,015,317
  1,070,396
Total liabilities, $m
  9,962
  316,274
  328,387
  341,348
  355,181
  369,911
  385,567
  402,181
  419,789
  438,430
  458,143
  478,974
  500,968
  524,177
  548,654
  574,455
  601,640
  630,273
  660,420
  692,152
  725,545
  760,675
  797,627
  836,487
  877,348
  920,305
  965,462
  1,012,924
  1,062,804
  1,115,221
  1,170,300
Total equity, $m
  -4,427
  35,142
  36,487
  37,928
  39,465
  41,101
  42,841
  44,687
  46,643
  48,714
  50,905
  53,219
  55,663
  58,242
  60,962
  63,828
  66,849
  70,030
  73,380
  76,906
  80,616
  84,519
  88,625
  92,943
  97,483
  102,256
  107,274
  112,547
  118,089
  123,913
  130,033
Total liabilities and equity, $m
  5,535
  351,416
  364,874
  379,276
  394,646
  411,012
  428,408
  446,868
  466,432
  487,144
  509,048
  532,193
  556,631
  582,419
  609,616
  638,283
  668,489
  700,303
  733,800
  769,058
  806,161
  845,194
  886,252
  929,430
  974,831
  1,022,561
  1,072,736
  1,125,471
  1,180,893
  1,239,134
  1,300,333
Debt-to-equity ratio
  -1.895
  6.160
  6.260
  6.370
  6.470
  6.570
  6.670
  6.760
  6.860
  6.950
  7.040
  7.120
  7.210
  7.280
  7.360
  7.430
  7.510
  7.570
  7.640
  7.700
  7.760
  7.820
  7.870
  7.930
  7.980
  8.020
  8.070
  8.110
  8.150
  8.190
  8.230
Adjusted equity ratio
  -0.810
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  121
  -16,610
  -6,319
  -6,609
  -6,920
  -7,252
  -7,605
  -7,982
  -8,381
  -8,805
  -9,254
  -7,591
  -8,093
  -8,623
  -9,182
  -9,772
  -10,395
  -11,050
  -11,741
  -12,469
  -13,234
  -14,040
  -14,888
  -15,780
  -16,718
  -17,704
  -18,741
  -19,832
  -20,978
  -22,182
  -23,448
Depreciation, amort., depletion, $m
  233
  15,591
  16,107
  16,658
  17,246
  17,873
  18,539
  19,246
  19,995
  20,788
  21,626
  20,374
  21,310
  22,297
  23,338
  24,436
  25,592
  26,810
  28,093
  29,442
  30,863
  32,357
  33,929
  35,582
  37,320
  39,147
  41,068
  43,087
  45,209
  47,439
  49,782
Funds from operations, $m
  720
  -1,019
  9,788
  10,049
  10,327
  10,621
  10,933
  11,264
  11,613
  11,982
  12,372
  12,783
  13,217
  13,674
  14,156
  14,663
  15,198
  15,760
  16,351
  16,974
  17,629
  18,317
  19,041
  19,802
  20,602
  21,443
  22,327
  23,256
  24,232
  25,257
  26,334
Change in working capital, $m
  -185
  -571
  -613
  -656
  -700
  -746
  -793
  -841
  -892
  -944
  -998
  -1,055
  -1,114
  -1,175
  -1,239
  -1,306
  -1,376
  -1,450
  -1,526
  -1,607
  -1,691
  -1,779
  -1,871
  -1,967
  -2,069
  -2,175
  -2,286
  -2,403
  -2,525
  -2,654
  -2,789
Cash from operations, $m
  905
  -5,478
  10,401
  10,705
  11,027
  11,367
  11,726
  12,105
  12,505
  12,926
  13,370
  13,838
  14,331
  14,849
  15,395
  15,970
  16,574
  17,210
  17,878
  18,581
  19,319
  20,096
  20,912
  21,770
  22,671
  23,618
  24,613
  25,659
  26,757
  27,911
  29,123
Maintenance CAPEX, $m
  0
  -12,970
  -13,453
  -13,969
  -14,520
  -15,109
  -15,735
  -16,401
  -17,108
  -17,857
  -18,650
  -19,488
  -20,374
  -21,310
  -22,297
  -23,338
  -24,436
  -25,592
  -26,810
  -28,093
  -29,442
  -30,863
  -32,357
  -33,929
  -35,582
  -37,320
  -39,147
  -41,068
  -43,087
  -45,209
  -47,439
New CAPEX, $m
  -81
  -9,679
  -10,305
  -11,027
  -11,768
  -12,531
  -13,319
  -14,135
  -14,980
  -15,858
  -16,771
  -17,722
  -18,712
  -19,745
  -20,824
  -21,950
  -23,128
  -24,359
  -25,648
  -26,996
  -28,408
  -29,887
  -31,437
  -33,060
  -34,762
  -36,546
  -38,417
  -40,378
  -42,436
  -44,594
  -46,858
Cash from investing activities, $m
  -85
  -22,649
  -23,758
  -24,996
  -26,288
  -27,640
  -29,054
  -30,536
  -32,088
  -33,715
  -35,421
  -37,210
  -39,086
  -41,055
  -43,121
  -45,288
  -47,564
  -49,951
  -52,458
  -55,089
  -57,850
  -60,750
  -63,794
  -66,989
  -70,344
  -73,866
  -77,564
  -81,446
  -85,523
  -89,803
  -94,297
Free cash flow, $m
  820
  -28,126
  -13,358
  -14,290
  -15,261
  -16,273
  -17,328
  -18,431
  -19,583
  -20,789
  -22,051
  -23,372
  -24,756
  -26,206
  -27,725
  -29,319
  -30,990
  -32,742
  -34,580
  -36,508
  -38,532
  -40,654
  -42,882
  -45,220
  -47,673
  -50,248
  -52,951
  -55,788
  -58,766
  -61,892
  -65,174
Issuance/(repayment) of debt, $m
  -707
  -290,476
  12,113
  12,961
  13,832
  14,730
  15,656
  16,615
  17,608
  18,640
  19,713
  20,830
  21,995
  23,209
  24,477
  25,801
  27,185
  28,633
  30,147
  31,732
  33,392
  35,131
  36,952
  38,860
  40,861
  42,958
  45,156
  47,462
  49,880
  52,417
  55,078
Issuance/(repurchase) of shares, $m
  0
  621,546
  2,590
  2,769
  2,965
  3,180
  3,412
  3,662
  3,931
  4,220
  4,528
  4,856
  5,205
  5,575
  5,968
  6,385
  6,825
  7,291
  7,783
  8,302
  8,850
  9,427
  10,036
  10,677
  11,353
  12,064
  12,812
  13,600
  14,428
  15,299
  16,215
Cash from financing (excl. dividends), $m  
  -780
  331,070
  14,703
  15,730
  16,797
  17,910
  19,068
  20,277
  21,539
  22,860
  24,241
  25,686
  27,200
  28,784
  30,445
  32,186
  34,010
  35,924
  37,930
  40,034
  42,242
  44,558
  46,988
  49,537
  52,214
  55,022
  57,968
  61,062
  64,308
  67,716
  71,293
Total cash flow (excl. dividends), $m
  10
  -318,603
  -1,244
  -1,329
  -1,429
  -1,543
  -1,672
  -1,816
  -1,975
  -2,149
  -2,337
  -2,541
  -2,761
  -2,997
  -3,249
  -3,518
  -3,805
  -4,109
  -4,433
  -4,776
  -5,139
  -5,524
  -5,930
  -6,359
  -6,813
  -7,291
  -7,795
  -8,326
  -8,886
  -9,475
  -10,096
Retained Cash Flow (-), $m
  -128
  -302,944
  -1,346
  -1,440
  -1,537
  -1,637
  -1,740
  -1,846
  -1,956
  -2,071
  -2,190
  -2,314
  -2,444
  -2,579
  -2,720
  -2,867
  -3,021
  -3,181
  -3,350
  -3,526
  -3,710
  -3,903
  -4,106
  -4,318
  -4,540
  -4,773
  -5,017
  -5,274
  -5,542
  -5,824
  -6,120
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  14.90
  15.65
  16.43
  17.25
  18.11
  19.02
  19.97
  20.97
  22.01
  23.11
  24.27
  25.48
  26.76
  28.10
  29.50
  30.98
  32.52
  34.15
  35.86
  37.65
  39.53
  41.51
  43.59
  45.77
  48.05
  50.46
  52.98
  55.63
  58.41
  61.33
PV of cash for distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  46.6
  43.3
  40.1
  37.2
  34.3
  31.6
  29.0
  26.6
  24.4
  22.2
  20.3
  18.4
  16.7
  15.1
  13.7
  12.3
  11.1
  10.0
  8.9
  8.0
  7.1
  6.4
  5.7
  5.1
  4.5
  4.0
  3.5
  3.1
  2.8

Mechel PAO, together with its subsidiaries, engages in mining and steel businesses in Asia, the Russian Federation, the Commonwealth of Independent States, Europe, the Middle East, the United States, and internationally. The company operates through three segments: Mining, Steel, and Power. The Mining segment produces and sells metallurgical and steam coal, coke, iron ore, and limestone, as well as coal tar, naphthalene, and other compounds. The Steel segment produces and sells semi-finished steel products, carbon and specialty long products, carbon and stainless flat products, wire products, forgings, hardware, and stampings and others, as well as ferrosilicon. The Power segment generates, distributes, and sells value-added products made from steam coal, such as electricity and heat energy. The company, formerly known as Mechel Steel Group OAO, was founded in 2003 and is based in Moscow, the Russian Federation.

FINANCIAL RATIOS  of  Mechel ADR (MTL)

Valuation Ratios
P/E Ratio 15.6
Price to Sales 0.4
Price to Book -0.4
Price to Tangible Book
Price to Cash Flow 2.1
Price to Free Cash Flow 2.3
Growth Rates
Sales Growth Rate 9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8%
Cap. Spend. - 3 Yr. Gr. Rate -31.8%
Financial Strength
Quick Ratio 0
Current Ratio 0
LT Debt to Equity -18.8%
Total Debt to Equity -189.5%
Interest Coverage 1
Management Effectiveness
Return On Assets 8.9%
Ret/ On Assets - 3 Yr. Avg. -14.8%
Return On Total Capital 3%
Ret/ On T. Cap. - 3 Yr. Avg. -30.8%
Return On Equity -2.7%
Return On Equity - 3 Yr. Avg. 67.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 47%
Gross Margin - 3 Yr. Avg. 41.5%
EBITDA Margin 22.6%
EBITDA Margin - 3 Yr. Avg. -14%
Operating Margin 15.5%
Oper. Margin - 3 Yr. Avg. 8.5%
Pre-Tax Margin 5.1%
Pre-Tax Margin - 3 Yr. Avg. -30.3%
Net Profit Margin 2.6%
Net Profit Margin - 3 Yr. Avg. -32.4%
Effective Tax Rate 34.9%
Eff/ Tax Rate - 3 Yr. Avg. 11.3%
Payout Ratio 0%

MTL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MTL stock intrinsic value calculation we used $253141 million for the last fiscal year's total revenue generated by Mechel ADR. The default revenue input number comes from 2016 income statement of Mechel ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MTL stock valuation model: a) initial revenue growth rate of 3.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 14.9%, whose default value for MTL is calculated based on our internal credit rating of Mechel ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Mechel ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MTL stock the variable cost ratio is equal to 99.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MTL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Mechel ADR.

Corporate tax rate of 27% is the nominal tax rate for Mechel ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MTL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MTL are equal to 102.5%.

Life of production assets of 20 years is the average useful life of capital assets used in Mechel ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MTL is equal to -6.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-267802 million for Mechel ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 266.417 million for Mechel ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Mechel ADR at the current share price and the inputted number of shares is $1.2 billion.


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COMPANY NEWS

▶ ETFs with exposure to Mechel PAO : June 22, 2017   [Jun-22-17 04:02PM  Capital Cube]
▶ Why Mechel PAO Stock Just Jumped 10%   [12:12PM  Motley Fool]
▶ Mechel Reports the 1Q 2017 Financial Results   [06:00AM  GlobeNewswire]
▶ Mechel Reports 1Q2017 Operational Results   [04:00AM  GlobeNewswire]
▶ ETFs with exposure to Mechel PAO : May 25, 2017   [May-25-17 12:44PM  Capital Cube]
▶ ETFs with exposure to Mechel PAO : May 11, 2017   [May-11-17 05:10PM  Capital Cube]
▶ Why Mechel PAO Shares Jumped 13% in April   [May-03-17 01:51PM  Motley Fool]
▶ Why Mechel PAO's Shares Popped 14% Today   [Apr-27-17 01:09PM  Motley Fool]
▶ Mechel Reports the 2016 Financial Results   [06:34AM  GlobeNewswire]
▶ Trade Port Posiet Named 2016 Best Stevedore Company   [Apr-03-17 08:30AM  GlobeNewswire]
▶ Mechel Reports Launch of New Longwall at Southern Kuzbass   [Mar-13-17 07:00AM  GlobeNewswire]
▶ Yakutugol Launches Open Mining at Dzhebariki-Khaya   [Mar-09-17 07:30AM  GlobeNewswire]
▶ Why Mechel OAO Stock Collapsed 20% in February   [Mar-07-17 08:09AM  Motley Fool]
▶ 2 Experts: Why Russian Ruble May Weaken   [Mar-06-17 04:13PM  Barrons.com]
▶ Russia's Mechel says Q4 steel output up 10 pct q/q   [Feb-13-17 08:37AM  Reuters]
▶ Mechel Reports 2016 Operational Results   [08:30AM  GlobeNewswire]
▶ The Best Mining Stocks of 2016   [Jan-08-17 09:44AM  at Motley Fool]
▶ Mechel Has Completed Restructuring With Russian State Banks   [Dec-26-16 06:07AM  GlobeNewswire]
▶ Mechel Increases Exports of Elga Coal   [08:00AM  GlobeNewswire]
▶ Is Seabridge Gold, Inc. (USA) (SA) A Good Stock To Buy?   [Dec-17-16 03:45PM  at Insider Monkey]
▶ Why Is Mechel PAO Stock Up a Red Hot 20% Today?   [Dec-12-16 12:18PM  at Motley Fool]
▶ Hedge Funds Are Still Buying Novanta Inc (USA) (NOVT)   [Dec-06-16 08:06PM  at Insider Monkey]
▶ Mechel Reports 9M2016 Operational Results   [04:30AM  GlobeNewswire]
▶ Mechel Reports the 9M 2016 Financial Results   [04:00AM  GlobeNewswire]
▶ Why Is Mechel PAO Stock Up a Red-Hot 19% Today?   [Nov-14-16 01:14PM  at Motley Fool]
▶ Why Mechel PAO's Stock Rocketed 36% Higher in September   [Oct-11-16 08:58AM  at Motley Fool]
▶ Mechel Reports the 1H 2016 Financial Results   [03:00AM  GlobeNewswire]
▶ Mechel Reports 1Q2016 Operational Results   [Jun-23-16 10:01AM  GlobeNewswire]
▶ Mechel Reports Change in Management   [Jun-15-16 06:00AM  GlobeNewswire]
▶ Mechel Announces Change in Management   [May-24-16 11:00AM  GlobeNewswire]
▶ Mechel Reports the 2015 Financial Results   [07:00AM  GlobeNewswire]
▶ Mechel Reports 2015 Operational Results   [04:00AM  GlobeNewswire]
▶ Your first trade for Wednesday, April 13   [Apr-12-16 06:29PM  at CNBC]
Stock chart of MTL Financial statements of MTL Annual reports of MTL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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