On November 14, it was announced that Kamaz plans to more than halve its investment program, from USD 250 million to USD 73-164 million. Additionally, the company’s BoD had earlier also made a decision to cut personnel by 10%.
We are upbeat on the company’s action plan for the ongoing crisis. In view of a considerable fall in demand, the investment payback period could substantially increase. In addition, due to the limited availability and serious appreciation of credit resources, they have become difficult to obtain. The drop in demand for the company’s products has been caused by the inaccessibility of leasing resources and a steep decline in the construction industry, which uses dump-trucks manufactured by Kamaz, owing to the inaccessibility of credit resources. In line with our estimates, up to 50% of trucks were previously sold on credit or leased. In view of the slackening demand, the company’s decision to cut personnel by 10% also looks appropriate and could help to cut expenses.
In line with our estimates, the fair value of Kamaz is USD 3.38 per share, which implies a 148% upside and corresponds to a Buy recommendation.
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