Magnitogorsk Rises to 10-Month High After BoA Makes It Top Pick

OAO Magnitogorsk Iron & Steel, Russia’s third-largest steelmaker, rose to the highest in almost 10 months in Moscow as Bank of America-Merrill Lynch & Co. chose it as the top pick in the local steel and coal industry.

Ural Mountains-based Magnitogorsk, known as MMK, gained as much as 8.9 percent as the bank said it has the spare capacity to take advantage of stronger demand for steel. The company’s London-listed global depositary receipts rose 6.4 percent to $7.

“MMK has the highest potential to ramp up export volumes,” analysts led by Eduard Faritov in Moscow wrote in a report today. Bank of America recommends investors buy Magnitogorsk and has a price estimate for the GDRs of $12.009.

Magnitogorsk rose 1.025 rubles, or 6.4 percent, to 17.002 rubles by the end of trading on the Micex Stock Exchange in Moscow, the highest closing price since Sept. 24.

Magnitogorsk, which operates Russia’s biggest standalone steel mill, returned to profit in February, earlier than it expected, after local demand picked up and it agreed to buy raw materials including iron ore for 40 percent less than previously, Oleg Fedonin, a vice president, said April 30. The company made a net loss of $100 million in the first quarter.

The steelmaker is in talks with OAO Sberbank and VTB Group on repaying loans early, he said today in Magnitogorsk, Interfax reported. The company borrowed 15 billion rubles ($472 million) from Sberbank and 4 billion rubles from VTB, the report added.

Magnitogorsk has stopped selling semi-finished products and focused on value-added steel, increasing cold-rolled output 47 percent in the second quarter compared with the previous three months, Rafkat Takhautdinov, vice president for strategy, said in a separate e-mailed statement today.

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