On September 9 the KAMAZ truck-maker reported its production figures for 8M 2008. The company says truck production picked up by 11.7% y-o-y to 37,800 units, bringing it RAS revenues of RUB 65.6 billion.
We view the 11.7% revenue growth as negative news, given that the company’s revenue shot up by 20.2% in the comparable period of 2007. We link the slowdown in revenue growth to a lack of spare production capacity at the company – and hefty investment would be needed to make up for this capacity shortfall. Making matters worse, competition on the market, primarily from secondhand vehicle importers, continues to stiffen. The absence of high import duties stifles production growth at KAMAZ, which has recently seen a steady shrinkage of its domestic market share.
Our estimates put the fair value of one common share in KAMAZ at USD 6.67, which implies an upside potential of 106% and corresponds to a BUY recommendation.
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