OREANDA-NEWS. September 10, 2010. The Automobile Manufacturers Committee of AEB published 8M10 sales data for new cars and LCVs in Russia. According to their report, sales in the country have increased by 14% YoY, pushing the YTD total to 1.14mn. Growth was +51% YoY for August, reported the press-centre of OTKRITIE Financial Corporation.

View: In spite of the recorded YoY rise in sales, we regard the data as neutral since the MoM dynamics were not overly impressive. Sales have declined slightly for a second consecutive month (-2.6% MoM) due to weather conditions and summer holiday season. We believe that September will be a crucial month in terms of future market dynamics. Even if the trend moves in a negative direction, we do not anticipate a strong drop in sales, especially given the import restrictions for used cars. Likewise, deferred demand and affordable lending rates should support the Russian automotive market.

The figures for August and 8M10 revealed that the greatest momentum among the automobile producers was found in inexpensive Chinese and Korean cars, as well as in premium brands such as Lexus and Mercedes-Benz. Russian manufacturers hold strong positions above the market average. We would also highlight the sales dynamics of Isuzu and SsangYong, which rose by 1160% and 88% YoY in August, respectively. This is largely due to a low base effect, nonetheless we see this as positive for Sollers.

Valuation and Action: Among Russian automotive companies, we like Sollers, which trades on a 2011 EV/EBITDA of 3.9x, implying discount to global peers of 40%.