According to the Ladaonline information agency, Avtovaz is considering raising its production target for 2008 from 947,000 to 1,009,000 vehicles and assembly kits a year. The company aims to boost its output of LADA Kalina cars by 62,000 units a year. To begin with, the workshop engaged in the assembly of this car model is to switch to start operating two shifts, enabling it to raise its output by 30,000 units a year. In addition, the plant will introduce Saturday shifts to assemble an additional 3,000 to 5,000 cars monthly.
We are upbeat about the company’s production expansion plans, which show that Avtovaz vehicles are in demand with customers. In 2007, the company made 901,000 cars and assembly kits, meaning output this year will increase by 12%, in line with overall growth rates on the Russian automobile market.
We estimate the fair value of one common share in Avtovaz at USD 1.49, with an upside of 3.3%, which corresponds to a HOLD recommendation. The fair price of one preferred share in the automaker is USD 0.70, with an upside potential of 9.5%, which corresponds to a HOLD recommendation.
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