Fixed Income Research DRIVING FORCE Guide to the Russian Machinery Sector October 03, 2008 Evgeniy Vorobiev
[email protected] Mch1.05e Guide to Machinery Sector Issuers Conclusions: Due to the difficulties on the Russian bond market, speaking of fair prices based on an issuer’s credit quality is not practical at the moment, in view of the prevalence of other factors in determining yields. However, according to our research, we recommend looking at the following issuers from the machinery sector that have good credit quality and stable businesses: - GAZ Group - KAMAZ Group - Sollers Group - OZNA Group - Kirovsky Zavod Group - AvtoVAZ Group - Transmashholding Group We consider that the following issuers’ high leverage demands a deeper analysis of their credit quality before making investment decisions: - NPO Saturn - UMPO - Perm Engine Company - NPO Energomash - Volgaburmash Group - Zavod Avtopribor Fixed Income Research 2 Guide to Machinery Sector Issuers CONTENTS: page Features of the Russian machinery sector Business processes of Russian aircraft and aircraft engine producers 6 MAIN FEATURES OF THE MACHINERY SECTOR 7 Sub-sector: Aircraft and aircraft engine production 7 Overview of machinery sector issuers 9 AIRCRAFT PRODUCERS Irkut SPC Group: Design and production of Su-30MK fighter jets, Yk-130 trainer planes; amphibious airplanes Be-200; production of 9 components for Airbus A320 and Airbus A350 airplanes. Total revenue in 2007 of $1022 mn. Sukhoi Company: Design and construction of the Russian regional airplane Sukhoi Superjet 100. The company had revenue over 1H07 of $0.3 mn. The guarantor on the issue is the Sukhoi Group, the designer and producer of the Su family of aircraft.