Azovmash Boosts Sales by 40% in 2007

According to Interfax, in 2007 Azovmash’s sales increased 40% to UAH 4.3 bln (USD 0.85 bln). Railroad car sales surged 50% to UAH 3.8 bln (USD 0.75 bln), while output climbed 16%. In other news, Azovmash Holding announced in a press release it plans to produce 11 780 railroad cars, vs. 9 827 in 2007, and therefore increase output by 20%. Azovmash Holding operates Azovzahalmash (AZGM: BUY) and Mariupol Heavy Machinery (MZVM: BUY). Inna Perepelytsya: The main top-line driver was booming the demand for railcar wagons in Russia. The press release does not provide a breakdown of revenues of the two companies. Based on interim 9m07 results, Azovzahalmash outstripped Mariupol Heavy Machinery in terms of growth thanks to its higher exposure to the railcar sector and posted 52% yoy growth in its bottom line. Stock prices more than tripled in 2007 both for AZGM (270%) and MZVM (218%). We see further upside for both companies based on continuing infrastructure-driven demand in the CIS and a rise in demand from the steel industry for converters (especially beneficial for MZVM, with an up to 40% share in its product mix). Azovmash’s owner’s efforts to consolidate the holding will be another value booster.