OREANDA-NEWS. July 12, 2010. Sales of new cars and light commercial vehicles in Russia increased 3% (by 23,304 units) in 1H10 compared with the same period in 2009, according to the Association of European Businesses (AEB). The bulk of this growth came from June sales, which rose 45% YoY (by 54,086 units). UAZ, SOLLERS and AutoVAZ posted substantial growth figures for 1H10 sales, rising 41%, 29% and 23%, respectively, reported the press-centre of OTKRITIE Financial Corporation.

View: While the sales growth posted is clearly positive for the sector, it reflected not only the impact of the cash-for-clunkers program, but also an overall improvement in economic conditions and rebounding customer confidence. Announcement of the approval for an extra RUB10bn (USD321m) for the second stage of the cash-for-clunkers program should give the car market a further boost. Consequently, we expect a sharp increase of sales in 2H10.

Valuation and Action: Trading on a 2011 EV/EBITDA of 7.6x, Sollers looks marginally undervalued relative to EM peers, which trade at 8x. The cheapest stock among Russian auto manufacturers is GAZ, which trades on a 2011 EV/EBITDA of 5x. KAMAZ stock is priced closer to EM peers, trading at 8.1x.