Luhanskteplovoz boosts output 1.6x in 2013, plans further gains in 2014

Leading CIS diesel locomotive producer Luhanksteplovoz (LTPL UK) produced 263 locomotive sections in 2013, the company’s press-service reported on January 20. In unit terms, that’s a 62% increase yoy from 162 locomotives in 2012, while in value terms the growth is 75%, according to the company. Most of the produced models were modifications of its flagship 2TE116U model (259 sections vs. 162 in 2012), all supplied for Russian Railways. On top of that, the company assembled four sections of its 2EL4 electric locomotives for the Ukrainian railway monopoly (designed by the related Russian Novocherkask plant).

The company said it plans to expand its locomotive production in 2014, providing a plan to supply 332 sections of its flagship diesel locomotives to Russia. For the Ukrainian railway monopoly, the company is going to expand supplies of its electric locomotives, specifying no plan for 2014 while only hinting that their output will reach 200 sections in 2015.

Alexander Paraschiy: The company’s 2013 production result is in line with the company’s earlier announced plan to produce about 250 locomotive sections for Russian Railways. Nevertheless, the production increase and further plans look encouraging for the company, which suffered from a lack of orders during the previous two decades. We have yet to see whether this growth will be followed by an increase in its 2013 profit: the company did not provide its interim results last year.

A plan to significantly increase production of electric locomotives in 2015 may imply the company will decrease output of its main product, which are diesel locomotives. This does not look encouraging for the company’s long-term value growth as the added value (and profitability) of its diesel locomotives (of own design) is higher than for its electric locomotives (of Russian design), we estimate.