Stock Analysis & Valuation PJSC Tatneft (ATAD.L)

• Previous Close: £2.35
• Sector Valuation Confidence Level: Low

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	0.10	-96
Intrinsic value (DCF)	264.01	11134
Graham-Dodd Method	2.10	-11
Graham Formula	22.80	870

Strategic Investment Analysis

Company Overview

PJSC Tatneft (ATAD.L) is a leading Russian integrated oil and gas company listed on the London Stock Exchange. Headquartered in Russia, Tatneft operates across the entire energy value chain, from exploration and production to refining and retail distribution. The company primarily focuses on Western Russian oilfields, supplying crude to its Taneco refinery and other domestic refineries, while also exporting to European markets. Downstream, Tatneft refines petroleum and gas products, distributing them through an extensive network of filling stations predominantly located in Russia. As a key player in the Oil & Gas Integrated industry, Tatneft benefits from vertical integration, ensuring stable revenue streams from both upstream and downstream operations. Despite geopolitical challenges, the company maintains a strong market position in Russia's energy sector, supported by its refining capabilities and retail presence.

Investment Summary

Tatneft presents a high-risk, high-reward investment opportunity due to its strong operational metrics and geopolitical exposure. The company reported robust FY 2023 financials, with revenue of RUB 1.59 trillion and net income of RUB 287.9 billion, reflecting efficient operations. However, its high beta of 4.01 indicates significant volatility, likely tied to oil price fluctuations and geopolitical risks. Tatneft's strong operating cash flow (RUB 326.6 billion) and manageable debt (RUB 43.2 billion) suggest financial resilience, but the lack of dividends may deter income-focused investors. Investors must weigh Tatneft's operational strengths against the risks associated with its Russian base and international sanctions.

Competitive Analysis

Tatneft's competitive advantage lies in its vertically integrated business model, which mitigates supply chain risks and enhances profitability. The company's Taneco refinery provides a stable outlet for its crude production, reducing reliance on external buyers. Additionally, Tatneft's retail network ensures consistent downstream revenue. However, the company faces stiff competition from larger Russian oil giants like Rosneft and Lukoil, which have greater scale and international reach. Tatneft's focus on Western Russian oilfields limits its geographic diversification compared to peers with Arctic or overseas assets. The company's relatively smaller market cap (RUB 881.5 billion) also restricts its ability to compete in large-scale projects. Nevertheless, Tatneft's efficient operations and strong cash flow generation position it well within the domestic market, though geopolitical constraints may hinder growth in Western markets.

Major Competitors

• Rosneft (ROSN.L): Rosneft is Russia's largest oil company, with extensive upstream and downstream operations. Its vast reserves and state backing provide a competitive edge over Tatneft, but its heavy reliance on government policies can be a weakness. Rosneft's international presence is more robust, though it faces similar geopolitical risks.
• Lukoil (LKOH.L): Lukoil is a major competitor with strong refining capabilities and a global retail network. Unlike Tatneft, Lukoil has significant international operations, reducing its dependence on the Russian market. However, its higher debt levels and exposure to sanctions present financial risks.
• Gazprom (GAZP.ME): Gazprom dominates Russia's gas sector but also competes in oil. Its massive infrastructure and state support give it pricing power, but its focus on gas limits direct competition with Tatneft in refining and retail. Gazprom's geopolitical exposure is even more pronounced due to its role in European gas supply.