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AvtoVAZ may postpone the launch of Renault Logan-based car assembly line from 2010 to 2011, which could have a negative impact on the company’s market share. In line with our projections, when the crisis comes to an end, low-price cars will be in big demand due to a fall in consumer purchasing power, and the company will have to compete with foreign car makers.
On November 17, AvtoVAZ released its 3Q 2008 production report, which determines a new date for launching production of 5 and 7-seat cars and vans based on the Renault Logan chassis. Earlier, AvtoVAZ had planned to start assembling these vehicles in 2010.
We are downbeat on the company’s decision: the license for the Logan chassis has already been acquired, and the assembly of new vehicles was to be incorporated into the company’s current capacities, so the project would not have required any large-scale investments. Since consumer purchasing power will generally come down after the crisis, budget-category cars will most likely see the biggest demand. Logan-based vehicles could help AvtoVAZ compete more efficiently with foreign cars, both those assembled in Russia, and those imported from abroad, and obtain a strong position in this market segment. Therefore, the postponement of the project’s launch to a later date could have a negative impact on the company’s position in the industry.
In line with our estimates, the fair value of AvtoVAZ common shares is USD 0.47 per share, which implies an 87.7% upside potential and corresponds to a BUY recommendation. The fair value of the car maker’s prefs is USD 0.26 per share with a 206% upside, which also corresponds to a BUY recommendation. Konstantin Romanov
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AvtoVAZ
Capitalization: $677 322 676,00
Common shares:
Price: $0,24
Delta week: -1,9%
Delta month: 13,3%
Delta year: -87,2%
Preferred shares:
Price: $0,055
Delta week: 0,9%
Delta month: -14,8%
Delta year: -92,6%
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0.244
0.616
