Intrinsic Value EVRAZ plc (EVR.L)

• Previous Close: £80.89
• Intrinsic Value: £5.42
• Upside potential: -93%

Stock Valuation Context

Business Model And Market Position

EVRAZ plc operates as a vertically integrated steel and mining company, with a diversified portfolio spanning steel production, coal mining, and vanadium processing. The company serves critical industries such as infrastructure, construction, rail, and energy, leveraging its capabilities in producing high-value steel products like rails, large-diameter pipes, and tubular goods. Its operations are geographically diversified across Russia, North America, and other international markets, positioning it as a key player in the global steel sector. EVRAZ's integrated business model allows it to control costs and maintain supply chain resilience, while its focus on value-added products enhances margins. The company's market position is reinforced by its expertise in niche segments like vanadium, used in high-strength steel alloys and energy storage solutions. Despite competitive pressures, EVRAZ benefits from its scale, operational efficiency, and strategic access to raw materials, which underpin its competitive edge in volatile commodity markets.

Revenue Profitability And Efficiency

In FY 2021, EVRAZ reported revenue of £13.49 billion, reflecting strong demand for steel and related products. Net income stood at £3.03 billion, with diluted EPS of 236 GBp, highlighting robust profitability. Operating cash flow was £3.42 billion, supported by disciplined cost management and favorable pricing dynamics. Capital expenditures of £963 million indicate ongoing investments to sustain production capacity and operational efficiency.

Earnings Power And Capital Efficiency

EVRAZ demonstrates solid earnings power, driven by its vertically integrated operations and focus on high-margin products. The company's ability to generate substantial operating cash flow (£3.42 billion) relative to its capital expenditures (£963 million) underscores efficient capital deployment. Its diversified revenue streams and cost-control measures enhance resilience against cyclical industry downturns.

Balance Sheet And Financial Health

EVRAZ maintains a balanced financial position, with £1.03 billion in cash and equivalents against total debt of £3.61 billion. The company's leverage appears manageable, supported by strong cash flow generation. Its liquidity position provides flexibility for strategic investments and debt servicing, though exposure to commodity price volatility remains a risk.

Growth Trends And Dividend Policy

EVRAZ's growth is tied to global steel demand and infrastructure spending, with FY 2021 performance benefiting from post-pandemic recovery. The company did not pay dividends in 2021, likely prioritizing capital retention for debt reduction or reinvestment. Future growth may hinge on expansion in high-value segments and operational optimization.

Valuation And Market Expectations

With a market cap of approximately £1.18 billion and a beta of 0.80, EVRAZ is viewed as relatively less volatile than the broader market. Investors likely price in its cyclical exposure but recognize its operational strengths and niche positioning in vanadium and specialty steel products.

Strategic Advantages And Outlook

EVRAZ's strategic advantages include vertical integration, geographic diversification, and expertise in high-demand steel products. The outlook depends on global steel demand, raw material costs, and geopolitical factors affecting its Russian operations. Long-term success will hinge on maintaining cost leadership and adapting to evolving industry trends like green steel production.

Sources

Company filings, London Stock Exchange data