OREANDA-NEWS. August 27, 2010. During the Moscow International Motor Show, Sollers management stated that the company expects FY10 net income of “about zero,” and that it also will launch new capacities in Kazahstan in the beginning of 2011, reported the press-centre of OTKRITIE Financial Corporation.

View: Our estimates for FY10 assumed that Sollers would post a net loss about USD33m, so achieving the breakeven point is certainly good news for the company. Moreover, Sollers’ CFO asserted that the company’s leverage remained at the same level YTD (about RUB23bn) and that he expects the company to reduce its debt next year. We consider this news as positive, particularly since the commissioning of new capacities in a region is generally a positive development.

In the initial stage these new capacities will account for about 10,000 vehicles, a number that should rise to 50,000 in the future. Given that in 7M10 Sollers sold 39,000 vehicles, this would represent a significant increase for the company. In addition, Sollers’ CEO announced that the company has applied to Vnesheconombank for a syndicated loan of about EUR2.1bn for the JV with Fiat, a project that he anticipates will be approved within 6 months. This JV could produce 300,000 cars a year under UAZ, Chrysler, Fiat and Jeep brands. The record high for Sollers in terms of annual sales is 122,700 vehicles, which it accomplished in 2008.

Valuation: Sollers trades at a 49% discount to global peers, which we do not feel is justified.