Ukrainian Railways plans to reach UAH 20.2 bln EBITDA in 2022

Ukrainian Railways (RAILUA) is going to increase its
net revenue by 18% yoy to UAH 101.0 bln, EBITDA by 35% yoy to UAH 20.2 bln and
net profit by 6.7x yoy to UAH 1.7 bln in 2022, the company reported on Dec. 17.
Those are extracts of its financial plan for the year 2022 that managers shared
with representatives of Ukrainian business.

Ukrainian Railways is going to increase revenue from
cargo transportation by 19% yoy to UAH 82.3 bln and from passenger
transportation by 12% yoy to UAH 8.2 bln in 2022. The company is planning to
spend over UAH 30 bln on CapEx (which will be an over 2x increase yoy), as well
as to receive support from the state budget totaling UAH 8.1 bln next year.

Alexander Paraschiy: The
presented numbers imply that in 2021, Ukrainian Railways is going to generate
UAH 85.6 bln of net revenue (1% less than its financial plan, but 6% more than
our estimate) and UAH 15.0 bln of EBITDA (22% less than its financial plan, but
9% more than our estimate). We do not
rule out that the company’s final 2021 results will move slightly closer to our
estimate. At the same time, we see the company’s EBITDA guidance for 2022 as
disappointing. Recall, the company’s 2021 financial plan, approved by the
government, assumes an EBITDA of UAH 19.3 bln already this year.

The company’s CapEx plan (which was UAH 27 bln for
2021, and seems to be under-performed by about 50%) was never met, but the next
year promises to be different. The recent governmental initiative to increase
rail freight rates, as well as the planned heavy support from the state budget,
show that the company is becoming a new target of the government-promoted “big
construction” project, with all its benefits and risks.

Importantly, the new status of Ukrainian Railways
as a profit center for the government has already paid off: as we earlier expected, the yield curve of RAILUA bonds now trades below
the curve of Naftogaz (NAFTO) which has taken some new social obligations on
domestic natural gas market. Thus far, we are neutral on RAILUA bonds.