Daily analyst comments

Kuibyshevazot, on May 29, for the first time disclosed its financials audited to IFRS. All of the company's previous financial statements had been under RAS. The data released was in line with market expectations, as the 1Q 2008 financial report delivered in mid-May already allowed investors to get an insight into the company's performance. Therefore, the IFRS financials have revealed little new data. The difference between the company's revenue figures for 2006 and 2007 was less than 1%, while its profit indices grew from USD 17 mn to USD 23 mn. The larger gap is probably due to the fact that profit indices released under IFRS reflect fluctuations in exchange rates during a reporting period.

Figure 1. Kuibyshevazot: Basic RAS financials in 2006-2007, USD mn

Indices	2006 (RAS)	2006 (IFRS)	Deviation, %	2007 (RAS)	2007 (IFRS)	Deviation, %
Revenue	469.1	473.4	0.9%	673.6	678.3	0.7%
Cost of production	378.5	364.7	-3.6%	466.9	451.6	-3.3%
Gross profit	90.6	108.7	19.9%	206.8	226.7	9.6%
Gross margin	19.3%	23.0%		30.7%	33.4%
Operating profit	33.3	13.4	-59.7%	131.0	108.6	-17.1%
Operating margin	7.1%	2.8%		19.5%	16.0%
Net profit	21.6	4.1	-81.2%	77.4	67.7	-12.6%
Net margin	4.6%	0.9%		11.5%	10.0%

Source: company data, Finam estimates

The release of financials under IFRS will undoubtedly have a positive effect on corporate governance levels at the company and should also enhance its appeal for investors. We regard the IFRS report as the first step in preparation for an IPO, which may be held in 2008, as was stated by the company's management. The forthcoming IPO may emerge as a substantial upside driver for the company's stock valuations.

We estimate the fair value of Kuibyshevazot (RTS:kazt) at USD 6.40 per common share, which implies an upside potential of 45% to the current stock valuations and corresponds to BUY recommendation.