Following Evraz’s successful redomiciliation to the UK we discontinue coverage of its GDRs (EVRZ LI) and initiate coverage of Evraz Plc (EVR LN) with a target price of GBp 412/share and a HOLD rating. Evraz Plc's shares were admitted for trading on the LSE on 7 Nov 2011. On 8 Dec it was confirmed that the shares would be eligible for inclusion in the FTSE 100 from 19 Dec, making it the only steel stock on the index. To date over 99.8% of the old Evraz shares have been converted into the new stock. The deadline for the offer has been extended until 26 Jan 2012. We recommend that the remaining ‘old Evraz’ shareholders accept the company’s offer to convert their GDRs into liquid LSE-listed securities, especially in light of the upcoming termination of the GDR programme, which is expected to take place on 8 Feb 2012. While we expect the company to benefit from the expected pickup in Russian construction activity in 2012, we maintain a cautious outlook as we believe that construction demand will remain too fickle to support greater upside in steel demand and prices, hence our HOLD rating on the stock.
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