OREANDA-NEWS. August 12, 2010. The power engineering company ELSIB announced preliminary RAS results revealing a 2.5x YoY increase in revenue in 1H10 (RUB931m). The company demonstrated net profit of approximately RUB55m compared to the RUB85.6m net loss it showed for the same period last year. Its bottom line, however, was 6% below the company's expectations, reported the press-centre of OTKRITIE Financial Corporation.

View: We see the results as slightly positive because the company managed to execute 95% of its sales plan and has posted its first 1H profit in several years. Its net profit margin corresponds to the annual value of 2009, but considering that 1H09 margins were much lower, we can expect better results throughout 2010.  Taking into account data on contracts and its 1H10 performance, we expect that ELSIB’s FY10 revenue will reach RUB1.7bn (about +5% YoY), while the profitability conservatively maintained at 2009 levels, although there is certainly evidence ELSIB could outpace expectations. 

Valuation: Based on a mid-market price, ELSIB trades on a 2010 EV/EBITDA of 5.0x and a 2010 P/E of 6.0x. The corresponding figures for global peers are 11.0x and 22.5x. These valuations imply discounts of 55% and 73%, respectively.

Action: While ELSIB trades with a significant discount to peers, the level of its liquidity and the low growth rates of its financials do not allow for a specific recommendation on its stock.