Jul
17
KAMAZ output the consolidated estimates for 2003 by IAS. According to the data of the report, the sales of the enterprise grew by 1.8% in dollar terms, and in ruble terms – lowered by 0.9% to the level of 96.3 bn RUR. EBITDA of KAMAZ totaled 8.6 bn RUR versus 13 bn RUR a year before. In 2008 KAMAZ gained net profit at the level of 1 bn RUR, which is 86.5% lower than the similar estimate of 2007.
The output data turned out to be lower than we expected, but better than the estimates of the other companies within the automobile sector, which have reported earlier. Only 4Q 2008 appeared to be “deadly”, when the construction paused, and so did selling of the heavy machines. As a result, by the results of the year KAMAZ sold 9.8% less trucks than in 2007 – 47.5 thousand items. Along with that, the expenditures of the company have been climbing, which leaded to the decrease of profitability. So, net profit margin formed 1% in 2008 versus 7.6% in 2007. EBITDA margin suffered less significantly – 8.9% versus 13.4% a year before. Such difference is explained by the almost 3 times grown expenses of debt maintenance.
Note that the net debt of KAMAZ grew during 2008 by 93% to 15.6 bn RUR. At the same time 85% of KAMAZ’ credit portfolio consists of short-term loans, almost half of which are nominated in Euro, and dollar credits make 12%. So, the credit portfolio structure does not bespeak in favor of KAMAZ.
In 2009 KAMAZ plans to sell about 28 thousand items of trucks. The enterprise operates via orders to avoid final products accumulation at the warehouses. The State bailout measures are important: the share of State orders in 2009 grew to 50% of the whole structure of orders versus 25% in recent years. Similar to the other automobile producers, KAMAZ is executing the anti-crisis program, which is aimed on lowering the expenditures by 50% average. Due to that a short working week schedule has been introduced at the enterprises of the group – 2 shifts, 4 days per week versus 3-shifts, 5 days a week schedule. Also the salaries of top-management have been cut-off, bonuses – cancelled. All together those measures should provide saving 50% of payment for labor fund.
Despite all the difficulties, KAMAZ continues executing the investment program, which has been calculated till 2011. The company works in the direction of creating a new gear shift transmission, engine, restyled interior, and also a multi-purpose vehicle. KAMAZ accounts on placing 10 bn RUR worth of bonds, under the security of which it plans to get state warranties, in order to finance the investment program.
We revised the financial model of KAMAZ considering the new data. As a result, the target price of one common share has been reduced to 1.32 USD from 5.98 USD. According to the current market quotes, that indicates 5.83% underestimation. Due to that we lower the recommendation for the shares of the company from BUY to HOLD.