Intrinsic Value PJSC Gazprom (OGZD.L)

• Previous Close: £0.58
• Intrinsic Value: £0.74
• Upside potential: +27%

Stock Valuation Context

Business Model And Market Position

Public Joint Stock Company Gazprom is a dominant player in the global energy sector, primarily engaged in the exploration, production, transportation, and sale of natural gas. As one of the world's largest natural gas producers, Gazprom operates an extensive pipeline network, supplying both domestic and international markets, with Europe being a key export destination. The company also has interests in oil, power generation, and other energy-related ventures, reinforcing its integrated energy business model. Gazprom's market position is heavily influenced by geopolitical factors, given its role as a critical supplier to Europe and its strategic alignment with Russian energy policy. Despite facing sanctions and shifting energy dynamics, the company retains significant pricing power and infrastructure advantages. Its vertically integrated structure allows it to control the entire value chain, from extraction to distribution, ensuring cost efficiencies and stable cash flows in favorable market conditions.

Revenue Profitability And Efficiency

Gazprom reported revenue of RUB 8.54 trillion for FY 2023, reflecting its scale as a major energy supplier. However, the company posted a net loss of RUB 652 billion, driven by geopolitical disruptions and reduced European demand. Operating cash flow remained robust at RUB 2.3 trillion, though capital expenditures of RUB 2.73 trillion indicate heavy investment in infrastructure and maintenance.

Earnings Power And Capital Efficiency

The company's diluted EPS of -RUB 27.58 underscores earnings challenges amid external pressures. Despite negative net income, Gazprom's operating cash flow highlights its ability to generate liquidity from core operations. High capital expenditures relative to cash flow suggest aggressive reinvestment, which may strain near-term profitability but could support long-term asset durability.

Balance Sheet And Financial Health

Gazprom's balance sheet shows RUB 1.43 trillion in cash and equivalents against total debt of RUB 6.97 trillion, indicating significant leverage. The debt load may raise concerns about financial flexibility, particularly given volatile energy markets and geopolitical risks. However, its asset base and state-backed position provide some stability.

Growth Trends And Dividend Policy

Growth prospects are clouded by geopolitical tensions and Europe's energy diversification efforts. The company suspended dividends in 2023, reflecting cash preservation priorities. Future dividend resumption will likely depend on earnings recovery and regulatory approvals.

Valuation And Market Expectations

With a beta of 0.92, Gazprom's stock exhibits moderate volatility relative to the market. The absence of a market cap figure suggests limited liquidity or trading restrictions. Investors likely price in elevated risk due to geopolitical exposure and uncertain cash flows.

Strategic Advantages And Outlook

Gazprom's strategic advantages include its vast reserves, pipeline monopoly, and state support. However, the outlook remains uncertain due to sanctions, demand shifts, and potential long-term declines in European gas reliance. Diversification into Asian markets and LNG could mitigate risks but requires substantial capital and time.

Sources

Company filings, market data