Finam: : Investments : Research Notes : NefAZ: major dump truck and bus maker

Neftekamsk automotive plant, or NefAZ, is a KAMAZ subsidiary producer of dump trucks and buses on Kamaz chassis. The company also produces trailers, semi-trailers and tank trailers. Thanks to the use of Kamaz chassis and the availability of surplus production capacity, the company is in no need of large-scale investments in the coming years. Rapid growth of the truck market and the high growth potential of the bus market give us grounds to expect that NefAZ will improve its financial indices and raise the appeal of its shares for investors.

We have made an assessment of NefAZ common shares under a peer group valuation method. We estimate the fair value of the company's common shares at USD 52.7 per share, with an upside of 25.5%, which corresponds to a BUY recommendation.

The main upside drivers for the company's stock are as follows:

Rapid growth of the truck market where NefAZ generates over a third of its total revenues. In 2007, the market grew by a hefty 32.6%, and its fast expansion is projected to continue in coming years, with growth driven by booming infrastructure construction.

NefAZ stands to gain from a shift in demand from mini-buses to large-capacity buses and a high pent-up demand for buses on the part of municipalities, which have only recently had the opportunity and funds to upgrade their bus fleets.

A possible rise in import duties on secondhand trucks may fuel demand for the products of domestic truck makers, which should benefit their finances and fundamental values.

NefAZ holds about 50% of Russia's lucrative market for tank trailers.

KAMAZ, the parent company of NefAZ, is to hold an IPO at the end of 2008, which is expected to lend support to its subsidiaries' stocks.

Konstantin Romanov

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Sector: Engineering
Company: NefAZ

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NefAZ: major dump truck and bus maker

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