KRAZ: Full Throttle (February 11, 2015)
JSC “AutoKRAZ” is the only Ukrainian producer of heavy trucks. The company produces 34 basic models and more than 300 modifications, including dump trucks, platform trucks, chassis, timber lorries, road tractors, as well as specialized utility vehicles and military-purpose vehicles. KRAZ is well-placed to benefit from the increased demand on military trucks and special-purpose vehicles from the Ukrainian Army in the next couple of years. Moreover, the company also has a promising JV with a Canadian armored vehicles manufacturer Streit Group, which resulted in new models “Shrek One”, “Cougar” and “Spartan” presented to the international public. The company has already increased its production by 50% in 2014, and we forecast it to grow by at least 35% in 2015. Furthermore, KRAZ currently trades at a 58-65% discount to the emerging market peers and global peers based on 2014e EV/EBITDA multiples, and at 94-95% discount based on 2014e P/E multiples due to its low market capitalization. Thus, we issue a BUY recommendation for the company’s shares with a target price of USD 0.017 (UAH 0.431), which corresponds to an upside of 288%.