Research Notes

Lebedyansky continues to exhibit strong sales growth (100% faster that on primary target markets) and still holds leadership in the Russian juice sector. Based on the company's 2006 indicators and also Q107 financial and operating figures, we revised our forecast for the company's fair value.

As a result, the year-end fair price jumped 9.8% compared to our previous forecast from $93.20 to $102.40. Meanwhile, we reiterated our Buy recommendation on Lebedyansky stocks.

Rapid growth in sales and a stronger marketing strategy have allowed Lebedyansky to bolster its leadership positions on the juice (core) market, commanding, according to AC Nielsen data, around 32.3% of the market in terms of value.

In 2006 Lebedyansky boosted total sales by almost 29% in terms of volume to 935 mln liters or slightly above our forecasts.

2006 revenue surged 38% y-o-y to some $710 mln. Meanwhile, sales in the juice division jumped 33.7% on the year to $619 mln and baby food revenue rocketed 62.6% to $83.4 mln.

Taking into account the company's results achieved in 2006 and Q107, as well as plans to build a new plant in the Novosibirsk region, we lifted our forecasts for the company's operating performance and also for revenue in the juice and baby food segments. The annual average pace of growth in 2007-2014 rose to 15%.

Lebedyansky's investment strategy calls for around $213 mln to be spent on expanding and upgrading production facilities in 2007-2008, and also on the rollout of its own logistical network. All in all, within the next five years the company is looking to invest about $300 mln. A new 300-mln-liter plant in the Novosibirsk region will be one of the company's key investment projects.

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Sergey Filchenkov

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