OREANDA-NEWS. March 03, 2010. The Ministry of Industry and Trade sees Russia's auto industry reviving by 2015, Vedomosti reports. The government plans to invest more than RUB600bn (USD20bn) by 2020 in support of the ailing industry. Similarly, AvtoVAZ hopes to reach pre-crisis production levels in 2015, having announced an annual production plan of 1.2m cars, effective 2011 (a figure three times its 2009 numbers). Nevertheless, the ministry intends to subsidize the acquisition of foreign car manufacturers by some domestic manufacturers in order to develop production technologies within Russia, reported the press-centre of OTKRITIE Financial Corporation.

View: Domestic manufacturers are likely to raise long-term government financing for the development of the auto industry. It is noteworthy that in early February Sollers announced plans to develop a new platform along with FIAT, having remained the leading auto manufacturer in Russia.  From our standpoint, the main buyers of foreign assets are likely to be Sollers and KAMAZ.

Valuation and Action: We consider the news as positive for Sollers, which trades on a 2009E EV/EBITDA of 14.2x. We recommend holding the stock, and reiterate our target price of USD 16/share.