Daily analyst comments

Interfax reports that Dmitry Mazelin has completed an asset restructure and has created OAO Unified chemical company, Urakkhim (OAO OHK URALKHIM), which specializes in the production of mineral fertilizers. Uralkhim has now consolidated the following production assets: 77.3% voting shares in Kirovo-Chepetsk Chemical Enterprise (Kirovo-Chepetsk), 77.84% shares in OAO Azot (Berezniki), OOO Managing Company URALKHIM, OOO URALKHIM-Trans and OJST Uralchemfreight.

OAO Galogen (Perm) and OOO Polymer plant of Kirovo-Chepetsk Chemical Enterprise are not part of this holding, as they are likely to form the core of an independent polymer holding. Mr. Mazelin did not contribute his 44% stake in OAO Mineral Fertilizers (Perm) to the holding, and he is expected to sell to Gazprom subsidiaries. At the start of December, the head of Mezhregiongaz admitted to the purchase of a controlling stake in Mineral Fertilizers.

The market recently received news that Dmitry Mazeling intends to hold an IPO in February 2008. Unicredit Aton is likely to be the organizer of the IPO. The holding plans to place both new and existing shares of the company. However, Uralkhim denied this information, saying that the company did not select an IPO organizer and has not prepared for an IPO. Nevertheless, we believe that the idea of a public offering is reasonable.

Based on the management estimates, Uralkhim's output in 2007 is to exceed 3.6 mn tons, revenue is expected to be over USD 700 mn., and EBITDA is to be USD 190 mn. Based on this data and applying a peer group valuation model, we have determined that if the holding launches an IPO, it might raise around USD 1 bn.

The fair value of OAO Azot (RTS: azop) is USD 1460 per share, implying over 60% upside. It corresponds to a Buy recommendation. However, investments in the company's stock are rather risky because Uralkhim intends to takeover the entire company, and could instigate a forced buyout.

We do not have and official recommendation for shares of Kirovo-Chepetsk Chemical Enterprise (RTS:kchk), because the company has a low transparency level.