Sumy Frunze Expects to Increase Sales 81% yoy in 2008

Sumy Frunze’s (SMASH: BUY) CEO Viktor Choban announced that the company sales target for 2008 is USD 586 mln (+81% yoy), and that it would grow sales over 3-5 years to USD 1 bln. The company’s 2007 financial results were announced by the AGM today: sales of USD 323 mln (+6% yoy), net income of USD 21 mln (+42.6% yoy, net margin is 6.5%), and EBITDA of USD 42 mln (+38% yoy, EBITDA margin is 13%). Shareholders voted not to make a dividend payout and to direct 2007 profits into development. Inna Perepelytsya: Sumy Frunze’s reported sales were 12% lower than our forecast, while margins were higher than we estimated (net margin of 6.0% and EBITDA margin of 12.7%). In view of the management’s ambitious sales targets, we expect the underreported sales to show up in forthcoming quarters, with profitability margins maintained. Our current 12M target offers 45% upside; we reiterate our BUY recommendation on the stock.