Motor Sich EBITDA surges 42% in 1H17

Ukrainian aeronautics engine producer Motor Sich
(MSICH UK) reported a 37% yoy jump in net revenue to UAH 6.92 bln in 1H17,
according to its July 26 regulatory filing. Its EBITDA increased 42% yoy to UAH
2.98 bln and net profit advanced 78% yoy to UAH 2.29 bln in 1H17.

Despite improved P&L, the company’s cash flow
parameters worsened in 1H17: cash generated from operations amounted to just
UAH 0.26 bln, or 82% less yoy. This might be a result of increased inventories
(rising UAH 1.2 bln YTD) and receivables and prepayments made (rising UAH 0.85
bln YTD). The company’s net debt nearly doubled YTD to UAH 0.92 bln.

Alexander Paraschiy: It seems like the company is managing to implement its plan to
increase production by about 10% in 2017, in comparable prices. In 2H17, we
expect some decline in Motor Sich’s growth rate of P&L indicators, but it
looks almost certain that this year will be much better for the company.
Decreased cash flow from operations is not a reason to worry, thus far, but
this parameter should be monitored in the future. We continue to treat MSICH
stock as a good short-term investment and to warn about the lack of clarity
about the company’s long-term future due to its non-transparent ownership
structure.