Research Notes

OAO Lebedyansky is a leader in the Russian juice market. However, it showed sufficiently contradictory results in the nine months of 2007 as a result of slightly weakened positions. We revised our fair value of the company based on the released results, and new trends in the juice, baby food and mineral water markets.

The primary reasons why we decided to revise our forecasts and slightly decreased the fair value for the end of 2008 are as follows:

• Unimpressive performance of the company in the nine months of 2007. Slowdown of sales growth rates in the juice sector and weak financial results. The net profit of Lebedyansky dropped by 5.7% in the reported period.
• Negligible loss of market share (according to AC Nielsen, Lebedyansky controlled around 30% of the juice market in terms of volume versus 31.1% in 2007) and lower margins compared to 2006.

We believe that these factors could have negative implications on investors' attitudes to the company and limit the upside potential in the mid term. Nevertheless, we keep our positive view on OAO Lebedyansky and believe that the nominal loss of margins is only a short term trend.

We also think that Lebedyansky might attract a strategic investor who would decide to invest in the company's future. This step might become a key upside driver for company's stock.

Based on our estimates, the fair value of OAO Lebedyansky in a year is to be USD 102.3 per share and the upside potential of 21.8% corresponds to a Buy recommendation.

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Sergey Filchenkov

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