Daily analyst comments

On August 6, Uralsvyazinform released 9M07 RAS financials. We have repeatedly noted that these accounting standards do not fully reflect operating data. However, we can draw some conclusions based on the operator's results.

The company's performance turned out to be strong in the reporting period. URSI's revenue climbed 18% year-on-year. Furthermore, the share of earnings from mobile segment (+1%) and Internet access (+2%) grew, i.e. from deregulated services. As a result, EBITDA margin rose 2% to 36% and net profit margin jumped 2% to 12%.

What's more, the pace of headcount reduction is really impressive, since the company's headcount dropped 16%, which resulted in lower payrolls and uniform social tax expenses.

Uralsvyazinform's RAS financials, Rub mln

	9M06	9M07	9M07/9M06
Revenue	24,497	28,897	18%
Internet access revenue	1,149	1,816	58%
Internet access revenue, share in revenue	5%	6%	2%
Wireless segment	7,426	9,075	22%
Wireless segment, share in revenue	30%	31%	1%
EBITDA	8,406	10,431	24%
EBITDA margin	34%	36%	2%
Net profit	2,469	3,407	38%
Net profit margin	10%	12%	2%
Average payroll, persons	31,738	26,747	-16%

Source: Company data, Finam estimates

Overall, we are upbeat on these results. However, until Uralsvyazinform releases its IAS financials, we reiterate our Sell recommendation on commons with a target price of $0.064 per share and Hold recommendation on prefs with a target price of $0.039 per share. Overall, we have an upbeat outlook on URSI. However, we do not currently view it as a suitable investment option for investors focused on higher asset value.