Investment thesis

Business platform and core expertise are established and provide strong base for future growth

Mature Business Platform

HMS Group has acquired main production and project capacities
The company has “know-how” production documentation and certificates
The company has established long-term relations with its clients
HMS Group has decided to exit the construction segment and significantly reduced its exposure to construction

HMS has entered into a market of gas transportation units for Gazprom. There is growth of revenue from cooperation with Gazprom not only in the field of compressors but of gas transportation units.
The Group has two new large clients – strategic cooperation with Gazpromneft and NOVATEK.
Revenue from nuclear pumps and oil processing pumps grows.
Revenue from construction reduces.
HMS has entered into the LNG market (compressors, pumps, special equipment).
The company has completed a pilot “green” project (BOSK).

Growth of export to the CIS and far abroad.
National project “Ecology of Russia”: these are new markets, supported by state financing and with limited competition, where HMS has already experience and competences.
HMS expects further development in the field of LNG.

HMS Group has a stable business platform and controlled level of leverage

HMS’ equipment is crucial to clients. It is installed at the final stage of construction projects and is difficult to replace.
The project cost is affordable within clients’ project budgets: equipment accounts for less than 2-3% of the total project CAPEX. As a result, clients do not postpone their purchases.

HMS is the established top player in large-scale projects (with a “blue-chip” client base).
The company enjoys sustainable, recurring business from standard pumps and compressors with over six thousand clients.

The target level of Net debt-to-EBITDA LTM ratio is 2.5 despite any extraordinary events and M&As. When the ratio exceeds the 2.5x level, imposition of step-by-step constrains on dividend size is started.
Debt is naturally hedged as HMS follows a strategy of a match in revenues, costs and debt currency structures – ca. 98% of debt is Russian ruble denominated.
Short-term debt remains at low levels and is actively managed.
Conservative budgeting of debt level.

Over 6,000 small and medium clients generate on average 75% of revenue.
The blue-chip client base covers nearly all Russia’s oil and gas major players.
Our largest clients operate through numerous contracts in different subsidiaries, taking independent purchasing decisions and offering numerous points of entry.

HMS Group is a fully invested business with modest maintenance capital expenditure needs at c. Rub 1-1.5 billion.
All major acquisitions have already been completed.
There are no strict dividend commitments, which allows us to minimize payments in a harsh market environment.