May
27
According to European Business Association (AEB) selling of passenger cars in RF dropped in April by 53% versus April last year to the level of 135,733 items, and by the results for four months the reduction totaled 44%. LADA cars selling volume in 1Q 2009 lowered by 38.7% versus 1Q 2008 and totaled 88,720 vehicles. In April AvtoVAZ, according to AEB, sold a bit more than 34 thousand vehicles, which is almost 50% lower than April 2008 level. However, change versus March 2009 was positive and formed 12.8%, which is better than market dynamics, which grew by 0.2% in April versus March.
Considering the current trends remaining the same, we assume the Russian automobile market might reduce in 2009 to 1.6 mn vehicles. AvtoVAZ’ share at the market might total by the end of the year about 22%, which correlates with selling at the level of 350 thousand vehicles. Considering the execution of the program of expenses cutoff and the current price policy of the company that might lead to loss at the operating level already. According to our forecast in 2009 the operating loss of AvtoVAZ might form 136 mn USD.
By the beginning of 2009 the credit portfolio of AvtoVAZ totaled more than 40 bn RUR, 12 bn RUR of which is required to be covered within the coming month. At the same time EBITDA of the company in 2009 might total approximately 4.7 bn RUR we suppose. So, debt/EBITDA ratio will be at the level of 9.3, which is an extremely high estimate.
Despite the above-mentioned matters, AvtoVAZ occupies a preferred position versus other motor-car constructors. The State promised to provide the giant with large scale financial bail in the volume of 25 bn USD for restructuring the current arrearage. Besides, AvtoVAZ will gain 90 bn RUR for financing the investment program, accounted till 2013.
We conducted estimation of company’s cash flow considering the current market conjuncture. We have also accounted 25 bn RUR bailout and credit attraction from state banks in the amount of 90 bn RUR. However, our forecasts end with 2013, after which AvtoVAZ promises to provide the consumers with a restyled model lines. However, the details of the investment program are not being disclosed due to which it is impossible to evaluate potential selling in the period after the forecasted one. Due to that the cash flow of the enterprise is actually covered by the significant capital expenses, planned for the four-year period. Due to that we call off the recommendation and the target price of AvtoVAZ’ shares and, besides, we outline the fact that the company steers to closing information, which raises risks of investing in the company’s shares even more.
AvtoVAZ shares: LADA is all hazy - May 27, 2009 (PDF)