She keeps in the shadow of other companies, there is no big news around her, but her shares are one of the most recommended buys on the market. Let’s name five reasons why this is so.
First: special status
Tatneft has been on the market for over 70 years. In the mid-1950s, it was the largest oil enterprise in the USSR. Unlike today’s market heavyweights with infrastructure scattered across the country, Tatneft’s production is localized in Tatarstan. This allows her to manage her business more effectively.
Growing out of Soviet trusts, Tatneft has retained its original culture of labor dynasties. Although the company is private, in fact it has strong patronage from the leadership of the region. The board of directors is headed by the president of Tatarstan, and the government of the republic has a “golden share”.
Second: large stocks
The resource base is located in the Volga basin, including the Romashkinskoye field, one of the largest in the world. Tatneft’s proven reserves allow it to produce 30 million tons per year in its usual mode for at least another 30 years, taking into account proven reserves – more than 70 years.
For comparison, in the two largest companies in the industry, Rosneft and LUKOIL, their proven reserves cover only 20-25 years of production, despite the wider geography of fields. Other things being equal, Tatneft looks more durable than its main competitors.
Third: domestic market
Tatneft is less dependent on raw material exports and foreign markets in general than others, including larger companies in the industry. Crude oil brings her only half of the revenue, the rest goes to processing. At the same time, the company does not have large assets abroad.
This makes Tatneft less vulnerable to possible sanctions. The domestic market does not fully provide the company, but still serves as a strong support. Tatneft’s own filling stations account for 20% of all revenue, three times more than LUKOIL’s and four times more than Rosneft’s.
Fourth: stable reporting
The company is more transparent than most competitors and therefore more predictable in terms of dividends. She was the first among the oilmen this year to present the financial statements for the first half of the year, showing, as always, high profitability.
The company’s performance is reflected in several indicators: net profit and EBITDA margins, return on equity and assets. They are higher than those of larger market players. Unlike its competitors, the company has no problems with the debt burden: net debt is consistently negative.
Fifth: historical dynamics
Tatneft shares are among the leaders of the Russian market in terms of total returns. Moreover, both on the long and medium horizons. Over the past 20 years, they have brought investors about 20% annually, excluding dividends (including – almost 25%). This year, stocks outperform the index for the tenth month in a row.
At the same time, Tatneft’s papers have been showing consistently positive results for years, just like the business as a whole. Having bought these shares in any month from 2000 to 2021, the investor came out with them in plus within one year in 75% of cases. For comparison, this happened only in 56% of cases with Rosneft, and less than 70% with LUKOIL.
Read about the prospects and goals for the growth of shares in the oil sector in the strategy for the Russian market for the fourth quarter
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