Russia’s Engine-Building Corporation eyes Motor Sich

Andrey Reus, general director of Russia’s aerospace holding Oboronprom, said yesterday it will start negotiations with Motor Sich (MSICH: BUY) on its inclusion in the new engine building consortium, Consolidated Engine-Building Corporation. Earlier this month Motor Sich General Director Viacheslav Boguslayev indicated the company’s interest in joining. Inna Perepelytsya: The twin announcements by the heads of both Oboronprom and Motor Sich signal that negotiations have a fair chance of success. We believe both sides would benefit from integration (see our May 2007 company update); for Motor Sich it could mean a foot in the door to supply engines to new Russian aviation projects. After a 48% drop YTD, our target price offers 102% upside. On the back of positive news flow since the beginning of the year, we reiterate BUY.