Stakhaniv Wagon stopped production for four days last week

Stakhaniv Wagon (UX: SVGZ UK) has resumed production on Monday after a four-day halt, Kommersant reported yesterday. The company attributed the suspension to low input stocks, but local media is rife with rumors that intrusive government inspections could have played a role. Vitaly Gorovoy: The company reported a delay in a USD 50 mln VAT refund in a press release dated August 18. We link last week’s temporary stop in production and delay in VAT refund to attempts by the authorities to pressure Stakhaniv Wagon’s majority shareholder – Konstantin Zhevago, who is linked to the Ukrainian opposition. We believe the work stoppage will be a one-off event that should not significant impact full-year results. We expect the company’s output to reach 7,500 freight railcars in 2011E (3,700 units were produced in 1H11). We reiterate our positive view on the company: BUY, TP: USD 1.61, upside: 167%.