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AvtoVAZ Stocks: 2007 results - August 7, 2008
Filed Under Uncategorized |
AvtoVAZ has announced its financial results of year 2007, which happened to be higher than our forecasts by 5-10%. Company’s revenue increased by 10.7% in USD value, EBITDA added 11.4% and formed 664 mn USD. AvtoVAZ’ net income formed 135 mn USD vs 114 mn USD in prior year. Increased sales volume was achieved by growth of Russian automobile market and budget-class automobile segment. 2007 results demonstrate that sales totaled 2.65 mn units. AvtoVAZ’ has sold 663.5 th automobiles at the domestic market and 106 th units were exported.
It should be mentioned that AvtoVAZ’ sales record results was achieved due to strong pricing policy, i.e. the company did not increase prices over the year, in order to improve sales volume, which had decreased over 1H 2007. However, this measure brings a lot of difficulties for company’s efficiency. Thus, 2007 results indicate that AvtoVAZ’ EBITDA margin hits prior year results. Therefore, due to company’s single time items influencing the report such as tax debt amortization, net income margin increased by 0.1 p.p., to 1.8% vs 2006 results.
We have renewed AvtoVAZ’ financial model, taking into account received data. We also have forecasted company’s sales volume on the base of the current trends of Russian automobile market development. Thus, expectations indicate that Russian automobile market will expand by 30%, i.e. the market value can form 3 mn automobiles. The assembly segment will have the highest growth dynamics: according to Ministry of Economic Development and Trade’s data, 750 th foreign brand cars, assembled in Russia, will be sold, which is by 70% higher than 2007 results. Import volume is expected to hit 1.7 mn automobiles. We estimated AvtoVAZ’ sales volume, taking into account the received data. We think that company’s sales share will decrease by 20-22%.
Let us remind you that AvtoVAZ plans to establish its development strategy in autumn 2008, which was designed in cooperation with Renault. In our model we have used only market trends, excluding the cooperation with French company.
We have estimated fair value of company’s shares, using DCF method, in 1.677 USD per common share and 1.258 USD per preferred share, below the previous forecasts by 18.6% and 18.5% respectively. A growth potential of share value is significantly increased, thanks to market quotes fall. Today’s potential forms 71.99% for common shares and 114.99% for preferred shares. We confirm our previous “BUY” recommendation on AvtoVAZ’s securities.
AvtoVAZ: 2007 results - August 7, 2008 (PDF)