Kyiv Court rules in favor of Transmasholding’s ownership of Luhanskteplovoz

The Kyiv City Appellate Court, in a December 7 ruling, confirmed Transmashholding as the legitimate owner of a 76% stake in Luhanskteplovoz (UX: LTPL UK), Interfax reported yesterday. The 76% stake in Luhanskteplovoz was privatized in mid-June in an auction won by an entity related to Transmashholding. In September, another bidder sued the company and the Kyiv City Economic Court ruled that the privatization auction was illegitimate. Yegor Samusenko: Though we expect the legal battles to continue, we stick with our view that Transmashholding will retain control of Luhanskteplovoz, which we base on Novembers orders Transmashholding placed at the plant, contrary to the fact that the company was not legally owned by Transmashholding. However, we think the market overreacted to the news, with stock making 14% over the last two days. We stay with our target price of USD 0.42 (downside of 10%) and SELL recommendation as we do not anticipate fast recovery in demand for locomotives and see a high risk of transfer pricing within Transmashholding. Recent details on Luhanskteplovoz’ sales confirm this hypothesis: the company sold locomotives to Transmashholding at a 20% discount to the price of the same locomotives sold to Mongolia.