Kryukiv Wagon produces 9,000 railcars in 2010

Kryukiv Wagon (UX: KVBZ UK) produced 9,079 freight and 38 passenger railcars in 2010, up 2.7x and 1.6x y-o-y respectively, Interfax reported yesterday. Yegor Samusenko: Strong monthly output in November-December came in line with previous results, mitigating downside surprises due to the shortage of railcar steel casting. The market for freight railcars is still bullish, with most of the plants in the CIS working at full capacity and prices stabilized at USD 60,000-65,000 per unit. Incorporating the new output data, we slightly revise our 2010E revenue projections for Kryukiv Wagon to USD 588 mln and for EBITDA to USD 71 mln (up 7% from previous forecasts). We expect strong production results to be repeated in 2011, with possible 10-20% downside in case of rallying steel prices. Though our outlook for the railcar market remains positive, we see the rally in Ukrainian railcar stocks, Kryukiv Wagon and Stakhaniv Wagon (UX: SVGZ UK), coming to an end, as they are trading close to their fair values. At its current price, KVBZ is trading at 7.4x EV/EBITDA ‘10E and 10.8x P/E ‘10E. We confirm out target of USD 5.0 per share for KVBZ, which implies 14% upside.