Metinvest to purchase 1,800 railcars

Ukraine’s largest steelmaker Metinvest (METINV)
reported on Nov. 16 that it plans to purchase 800 railcars by the end of 2017
and 1,000 more railcars in 2018. After these purchases, Metinvest’s fleet of own
railcars will reach 4,000 units, the company said, emphasizing that the
decision to purchase railcars is related to the worsening deficit of rolling
stock in Ukraine.

Dmytro Khoroshun: The
railcars’ price will be important to consider. We estimate that a new gondola
railcar might sell for about USD 34-38K per unit net of VAT, based on our
analysis of Ukrzaliznytsia’s tender expectations and actual purchases in 2017,
as well as Kryukiv Railcar’s (KVBZ UK) 2016 financial data. It would be
negative if Metinvest acquires railcars at significantly higher prices. We are
keeping our neutral view on METINV Eurobonds as we see a high refinancing risk
for the next twelve months.