Veles Capital maintains "buy" recommendation on KAMAZ
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View information about KAMAZ: news, researches and price targets.
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Veles Capital presents analysis update on KAMAZ:
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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Russian stock market daily morning report (September 09, 2010,Thursday)
On Wednesday the Russian share market showed growth having renewed the levels of four weeks maximums. Quotes were climbing at the neutral news background and likely the growth might be explained not by the fundamental reasons, but technical factors and Fall raise of business activity. Growth leaders were the shares of Gazprom Neft (+5.7%) and Polimetal (+6.4%).
Russian stock market daily morning report (September 08, 2010, Wednesday)
On Tuesday quotes reduction could be observed at the Russian share market. We might outline the weak stats on orders of industrial enterprises in Germany and alarms on the stability of the European banks as the negative news for the market. Moreover oil price reduction was indicated at the market. Totally the most liquid shares were loosing a little, but not serious loss took place on the sector. A lot more dramatic variations occurred on the former leaders and mad market favorites - notes of AvtoVAZ, NitrInvestHolding, RTM, Pharmacy Chain 36.6, which lost 5-10%.
Russian stock market daily evening report (September 08, 2010, Wednesday)
Against the background of positive macroeconomic stats from the European states, the Russian market was climbing. The most serious moves among the blue chips were on Sberbank. Among the less liquid shares we might outline the resumed demand in AvtoVAZ and Pharmacy Chain 36.6. We do not exclude that growth goes on tomorrow. However, volatility of the market might raise due to the big volume of the scheduled stats output.
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| Russian Stocks Recommendations |
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We have revised our estimation of Gazprom’s shares. The reason for up-dating the company’s model was the report by IAS for 1H 2009, the budget draft for the next year and corrections of WACC method calculation. The provided financial report of the gas monopoly totally brought no surprises. As it has been expected, the second quarter was worse than the first one and likely was the weakest within the whole year. In 1H 2009 the financial estimates were affected by the decline of the gas sale at all markets by 22.3% average, and by the reduction of the retail price of gas by 9.6% in the state of the far abroad and by 24% in Russia. As a result within the six months of the year 2009 sales slipped by 24.1 bn USD or by 32.8% and formed 49.285 bn USD, operating profit and EBITDA showed reduction by 56.7% and 52.6% respectively and formed 12.98 bn USD and 16.18 bn USD.
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On Monday Rostelecom summed up the results of 1H 2009 by IAS. According to the report, the sales within the half year year grew by 4.4% versus 1H 2008 and formed 32.8 bn RUR. Net profit dropped from 9.8 bn RUR to 1.5 bn RUR. OIBDA margin reduced by 7.6 p.p. to the level of 17.6%.
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