Daily analyst comments

As reported by Kommersant business daily, on April 4, 2007, the media wired that Renova Orgsintez received an option from Khimprom's owners valid until year-end 2007 to buy out 75%+1 share in the enterprise. According to Kommersant, Renova Orgsintez could buy 75% + 1 share in Khimprom based on the company's valuation of $275-300 mln, which is nearly 3.5-fold higher than the company's current market cap. It's noteworthy that we have not yet received any official confirmation of the option. However, Renova Orgsintez declined either to confirm or deny the news.

Meanwhile, in the event that an option agreement exists, we cannot say for sure that the offered price for the stake is clearly overstated. Moreover, Renova's valuation could serve as a new benchmark for investors on the market to determine Khimprom's fair price, which could push up the company's market cap in the near future.

Novocheboksarsk-based Khimprom is one of the most undervalued companies, which manufacture basic organic synthesis products. The company's equity structure is not quite clear. The state does not own any stake in the company and over 90% of voting shares are registered on the accounts of Depositary Clearing Company. In recent years, the company has reported stable profit and has not faced any crises, like its rivals (such as Kirovo Chepets Chemical Plant or Volgograd-based Khimprom). Novocheboksarsk-based Khimprom possesses unique production facilities and is the only manufacturer of a number of chemical additives. In addition, the company is the largest Russian producer of hydrogen peroxide. Khimprom is a suitable asset for Renova which attempts to diversify and expand portfolio of investments in the chemical industry and therefore establish the entire chain of the chemical production cycle. Khimprom could also benefit from having Renova among its shareholders, largely due to using production potential of chemical enterprises run by Renova and overall, powerful stance of the latter on the target markets and Renova's management experience in the chemical industry.

Our estimated target price of Khimprom (Novocheboksarsk) common shares (RTS: HIMC) calculated based on a comparative analysis is $0.10, which corresponds to a Buy recommendation.