Investment Company Troika Dialog Ukraine raised to buy recommendation on shares of JSC Khartsyzsk Tube Works (HTZ, Donetsk reg.) Inc. Interpipe Novomoskovsk Pipe Plant ( Interpipe NMTZ, Dnepropetrovsk reg.) and OAO Dnipropetrovsk Tube Works (LED), as well as re-appropriated the recommendation sell shares of OAO Interpipe Nizhnedneprovsk Pipe Plant ( Interpipe SCITEC, Dnipropetrovsk), according to a report of an analyst.
We have improved the recommendation on shares of the three manufacturers of pipes with a sell to buy : Khartsyzsk Pipe Plant, Novomoskovsk Tubes and Dnipropetrovsk Tube Works. In doing so, we reviewed the 12-month target price (the target price ) at shares Khartsizk pipe factory up to $ 0,213 per share, which implies a 30%-ing growth potential from its current level, Novomoskovsk Tubes - up to $ 0,274 per share, which implies a 93%-ing growth potential from its current level of Dnepropetrovsk pipe plant - up to $ 21, 19 per share, which implies a 108%-ing growth potential from its current level. At the same time, we re-assigned to the recommendation of sell shares Nizhnedneprovsk tube-rolling mill and established a target price of $ 0,306 per share, which implies a 75% decline of shares , — notes the analyst, Peter Keller, prepared a report Troika Dialog Ukraine.
He stresses that the profitability of pipe plant grows thanks to low prices for steel. P. Keller notes that the price of steel dropped by 70% from pre-crisis levels, while prices for the pipe fell only 40%, which would allow producers to increase their margin of pipes EBITDA c 7% in 2008 to 22% in 2009 and retained its at 22% in 2010.
At the same time, Keller stresses, reducing the release of pipes is likely to have reached its bottom, and production will remain at a stable level until the end of 2010, given the decline in world demand and low prices for steel.
At the same time, the analyst expects that the total release of these four companies in 2009 compared with the previous year decreased by 32%.
Keller predicts a decline in Khartsyzsk Pipe Plant by 47% in 2010 in connection with the completion of large orders by the end of 2009 and the absence of a comparable new orders for 2010. Accordingly, the expert believes, reducing the overall level of production of Ukrainian tube-rolling sector in 2010 amount to 27%.
According to an analyst in the years 2011-2013 the overall average annual growth in production of four companies listed in the report was 24%, reaching levels of 2003, although it is still 11% lower than in 2008.
Basically, we give preference to producers of welded pipes in connection with the high flexibility of their production cycle, as compared with the production of seamless pipes. Also, many companies look more attractive with the low percentage of sales on the Ukrainian and Russian markets, - stated in the Investment Report.
HTZ produces longitudinal welded pipes of large diameter (from 478 mm to 1420 mm) for the main gas and oil pipelines. Its capacity allows to produce 1.6 million tonnes of pipes per year.
According to the company at the end of 2008, Metinvest BV (Netherlands) owns 91.7931% of JSC HTZ.
HTZ is a group Metinvest, shareholders are Donetsk CJSC System Capital Management (SCM, Donetsk) (75%) and a group of companies Smart holding (25%) who took part in the management team Metinvest partnerships.
Interpipe SCITEC produces longitudinal welded pipes from 152 to 530 mm. Its production capacity exceeds 850 tons per year.
As at on 31 December 2008, Saleks Investments Limited owned 60% stake in the plant, Interpipe Limited (both - Cyprus) - 21.8405%, Ltd. Interpipe Ukraine (Dnepropetrovsk) - 12.0627%, the members of the executive body Society - 3,74% of shares.
The authorized capital of OAO Interpipe SCITEC is 100 million UAH, nominal shares - 0,25 hrn.
Interpipe NMTZ produces longitudinal welded pipes from 152 to 530 mm. Its production capacity exceeds 850 tons per year.
According to the company at the end of 2008, owned by Interpipe Limited (Cyprus) is 87.641% of the shares of the company.
NMTZ Paid in capital - 50 million UAH, nominal value of 1 share - 0,25 hrn.
Interpipe estimates its share of the world market of seamless pipes at 4.3%. Annual turnover in 2007 amounted to $ 1.8 billion, it was produced 1.472 million tons of pipe and wheel products.
The company consists of OJSC Interpipe Nizhnedneprovsk Pipe Rolling Plant, OJSC Interpipe Novomoskovsk Pipe Works and Interpipe Niko-Tube.
OJSC Dnepropetrovsk Tube Works - one of the leading Ukrainian manufacturer of pipe made of black metal and a monopolist in Russia for production of bimetallic tubes.
According to the company at theend of 2008. owned I.S.H.C. Industrial Steel Holding Co Limited (Cyprus) is 56.33% shares, the investfonda Kreminna-Invest CJSC AMC Altera Asset Management - 18.66%.
plant controls corporation Industrial Union of Donbass (IUD, Donetsk).
Share capital - 86 million 896.2 thousand UAH, nominal shares - 82.31 uah.
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