OREANDA-NEWS. July 30, 2009. The government decided against hikes for 2010 in the export duty for Gazprom or in the mineral extraction tax for gas producers, reported the press-centre of OTKRITIE FC.

View: Last week, Gazprom CEO Alexei Miller met with Prime Minister Putin to lobby against repeated Ministry of Finance proposals that are unfavorable for the gas industry. The Prime Minister threw his support behind the gas industry (especially Gazprom) in the matter. Meanwhile, Gazprom has proposed that the government place a duty on imported gas in order to offset decreases in the federal budget.

PM Putin declined to comment on this issue. We were initially doubtful that the government would adopt such a decision, since it would undercut gas producers in the wake of a 21% decline in domestic gas output in 1H09. In keeping with our estimates, the rise in the export duty from 30% to 35% effective 2010 could have spelled a 13% decrease in Gazprom’s 2010 revenue. Nevertheless, we do not rule out a hike in the MET for gas producers after 2010, but expect that any tax increase coupled with domestic gas price liberalization.

Valuation: Gazprom’s P/E amounts to 4.4x, and the stock trades at a 52% discount on P/E to the rest of the energy sector.

Action: We view the news as neutral for Gazprom’s stock price. Our long-term target price for Gazprom’s local shares is US8 (US31.8/ADR), with a BUY recommendation.