23 September 2011
Ukrzaliznytsya’s management plans to meet with representatives of Chinese locomotive producers to discuss locomotive purchases and financing options from Chinese banks, industry publication RZD-Partner reported yesterday. Vitaly Gorovoy: In August, Ukraine’s Cabinet of Ministers confirmed plans for Ukrzaliznytsya to buy 66 locomotives in 2012, 104 units in 2013, 110 in 2014, 114 in 2015 and 115 in 2015. The volume of the entire program is UAH 28.7 bln, according to our estimates, which will be funded by Ukrzaliznytsya’s own funds and loans. Previously, we evaluated the news positively for the only local producer of locomotives, Luhanskteplovoz (UX: LTPL UK, BUY), which could get the bulk of the order. In our DCF-model we project orders for Luhanskteplovoz of 385 locomotive sections from Ukrzaliznytsya in 2012-15E, which could bring in UAH 4.9 bln (41% of total company’s revenues in 2012-15E). According to our projections, Luhanskteplovoz’s share of Ukrzaliznytsya’s total purchases is only 17%, thus we do not expect any significant changes in comparison to our earlier assumptions and maintain our bullish view on Luhanskteplovoz stock (TP: UAH 5.58, upside 125%).