21 December 2011
Luhanskteplovoz (LTPL UK) received a USD 300 mln order from Russian Railways to produce diesel locomotives in 2012, the company announced yesterday. Management also estimated 2011 production at USD 199 mln (up 67% yoy). The company plans to make 102 diesel locomotive sections in 2011 (6% more than we expected, up 55% yoy) and eight electric sections for Ukrzaliznytsya (flat yoy). The company also noted delays with previously announced orders from Ukrzaliznytsya subsidiaries due to their failure to prepay. Roman Dmytrenko: News of strong demand for Luhanskteplovoz’ locomotives from Russia is a positive surprise to us, especially given the constant delays in orders from Ukrzaliznytsya’s local subsidiaries. The Russian Railways order, if realized, would load Luhanskteplovoz’ production facility ~80% in 2012 – a 10-year record. We estimate the company will report net revenue of about USD 185 mln in 2011 (up +73% yoy) and USD 300 mln in 2012 (+62% yoy). The company’s profitability remains a key concern due to transfer pricing as most inputs for its locomotives are sourced from related parties in Russia.