The truck maker's press service reported on December 3 that KAMAZ is to sign an agreement to launch a JV with the German Knorr-Bremse Systeme fur Nutzfahrzeuge GmbH on December 4. The 50/50 joint venture is to manufacture brake units for KAMAZ vehicles.
In our opinion, both parties stand to gain from this cooperation. The Russian company will gain access to German technology and its partner – a stable market. Furthermore, over the next three years both parties plan to significantly expand cooperation and supply brake units to other Russian automotive companies.
We view this development as moderately upbeat for KAMAZ. This venture will be the third auto component project in cooperation with international manufacturers, and based on foreign technology. This is a positive trend for investors and sends a signal that the truck maker is looking to implement advanced technology before foreign rivals' massive expansion into the Russian domestic market and this will enhance KAMAZ's competitive edge.
According to our estimates, the estimated fair price of KAMAZ is $5.76 per common share, based on 2007 forecast showings, which implies a 29.6% upside and corresponds to a Buy recommendation.
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