OREANDA-NEWS. April 19, 2011. On Saturday, Apr 16, the Ukrainian PM Mykola Azarov announced that Gazprom has agreed to supply ~4 Bcm of natural gas to Ukrainian nitrogen fertilizer producers at the price of 170 USD /Mcm, Bloomberg reported that same day. Separately, The Kommersant newspaper, added that only Group DF controlled plants (Stirol, CherkasyAzot, SeverodonetskAzot, RivneAzot) will enjoy the discounted gas, citing the sources familiar with the matter.

Millennium Capital considers the news as STRONGLY POSITIVE for Stirol. With discounted price (~42% to the regular tariff) of natural gas, Stirol is posed for a sharp margin rebound already in 2Q11. We estimate the gross margin may surge to ~40% in 2Q11 from an estimated 14% under regular tariff and reach ~35% for the full year. Meanwhile, EBITDA and the net margins may rise to 32%/22% for the full year vs -12%/-20% in FY10. Our preliminary Dec-11 PT for STIR goes up to USD 24 (UAH195) which yields upside of nearly 150% and a more than sufficient margin of safety to consider Stirol as a terrific short-term trading opportunity.