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%. 

[BUY] Avangard: revision of target price (December 1, 2014)

Avangard [AVGR LI], a leading egg products and shell eggs producer and exporter in Ukraine, published its financial results for 9M2014 last Friday. The company’s revenues fell by 24% y/y to USD 355 mn, while Avangard’s gross profit declined by 45% y/y to USD 102 mn. At the same time, the company’s EBITDA decreased by 47% y/y to USD 109 mn, which was mainly caused by the devaluation of the Ukrainian hryvnia and a drop in demand for shell eggs in Eastern Ukraine due to continuing conflict in the area. Avangard’s net loss for the period amounted to USD 6 mn, including a one-off impairment charge of USD 26 mn (non-current assets), and USD 49 mn of FX losses.

Avangard: initiating coverage report (October 22, 2014)

Avangard, the leading vertically integrated producer of eggs and dry egg products in Ukraine and #1 in Eurasia, has introduced a sustainable dividend policy with a pay-out ratio of 12.5% for 2013 and range of 15%-40% in subsequent periods, thus becoming the second heavy dividend stock in the Ukrainian agro universe. The company is poised to finish its intensive CapEx program by end-2014, indicating the possible maximization of dividend payout ratio afterwards.