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Veles Capital maintains "buy" recommendation on KAMAZ 9 September 2008 Source: www.veles-capital.ru
Late this August KAMAZ group published its financial results under IAS 2007 report. Group’s revenue increased by 45% vs 2006 results, EBITDA added 83.5% and formed 499 mn USD, company’s net income increased twice to 291 mn USD. KAMAZ’s efficiency also increased, coupled with high growth rates of main indicators. Thus, EBITDA margin formed 13.1% (10.4% over year 2006), a growth of net income margin formed 7.6% against 5.4% over year 2006. We see KAMAZ’s financial report as positive. Some results of the company have met our expectations: group’s revenue has met our forecasts, whereas operating income exceeded our expectations by 3%, but net income of the company happened to be higher than our estimations. Growth rate of income formed 93% vs 30% (expected). The main reason of such dynamical growth is favorable economical situation, especially, active development of the construction sector. Demand on trucks increased by 20% over year 2007. Moreover, favorable market conditions and leading positions at Russian automobile market, allowed KAMAZ to increase prices. Thus, according to last year results, an average price of KAMAZ’s products increased by 23%. In the middle of August KAMAZ announced its plans to sell 42% of its stake to Daimler. KAMAZ hopes to achieve radical renewal of its production and technical base, by means of cooperating with Daimler. The deal will be made on October 2008. Taking into account an average company’s capitalization of 6 months, the price of portfolio can form about 1.5-2 bn USD and Daimler’s premium of Russian market entry. We think that following deal can act as extra catalyser of a growth for KAMAZ’s securities. We have reviewed financial model of KAMAZ, taking into account published data, a growth of metal prices, which could have a negative effect on company’s efficiency over year 2008. Moreover, taking into account 6 months of company activity, we have reviewed fundamental price of NefAZ (KAMAZ’s subsidiary). As a result, we decreased a forecasted price of common shares (KAMAZ) by 7%, to 5.98 USD and by 7.4%, to 45.75 USD for common shares of NefAZ. However, taking into account a fall at fund markets, companies’ stocks have a growth potential. We confirm “BUY” recommendation on KAMAZ’s and NefAZ’s securities. |
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