Machinery
April 19, 2012
Stakhanov Wagon continued a pattern of failing to meet its production guidance in 1Q12, and saw its freight car output fall by 35% YoY in the period. This comes on the heels of FY11’s 8% YoY drop in output. Despite management’s stated production target of 8,100 freight cars for FY12, we doubt that the company will produce more than 7,000 units this year. Meanwhile, Stakhanov continues to be embroiled in legal challenges to its control over Czech cast iron manufacturer CKD Kutna Hora, an important link in its supply chain. We are slashing our target price for the SVGZ stock by 53%, to USD 0.80 per share. The lower TP still implies a potential upside of 48%, and we therefore reiterate our BUY recommendation for the issue.
