Motor Sich revenue falls 13%, profit plunges 79% in 9M18

Ukraine’s leading aviation engineering firm Motor Sich
(MSICH UK) generated UAH 7.91 bln net revenue in 9M18, or 13% less yoy,
according to its Oct. 30 regulatory filing. The company’s EBITDA dropped 60%
yoy to UAH 1.54 bln and net profit plunged 79% yoy to UAH 0.54 bln. At the same
time, its work-in-progress and prepayments received increased to record-high
levels as of end-September to UAH 10.77 bln (up 8% yoy) and UAH 4.12 bln (up
36% yoy), respectively.

The company’s 9M results imply that in 3Q18 alone, its
revenue decreased 8% yoy (to UAH 2.10 bln) and EBITDA fell 67% yoy (to UAH 0.29
bln), while its quarterly bottom line turned negative (at UAH -0.36 bln) for
the first time in many years.

Alexander Paraschiy: Increased
prepayments received and work-in-progress suggest Motor Sich is working on a
large order, implying its revenue will surge once this order is executed. We
expect this to happen in 4Q18, which will be much stronger for the company than
all the previous quarters of this year.

The same pattern was demonstrated by the company in
2017, when in 4Q it generated doubled revenue and tripled EBITDA than in the
first three quarters, on average. Based on higher amounts prepaid and work-in-progress
as of end-September 2018, Motor Sich’s 4Q18 performance could be even stronger
than in 4Q17. That said, we warn that Motor Sich shares are blocked for trading on the
Ukrainian exchanges.