The September result supports our expectation that the market will gradually soften. We continue to believe that the YoY growth rate will slide to single digits by the end of the year.
Our macro team also highlights that on a SA basis, the MoM growth was minus 3.5% in September, while MoM growth of 0.3% was the weakest in many years (even the September 2008 reading was above it, at 2.3%). The weakness was widespread, with both local and international brands showing a sales decline on the SA basis. Slowing car sales are in line with our expectations of weaker internal demand in 2H12 and come in line with the first estimate of a further slowdown in retail lending.
At the same time, we do not see any threat to our valuation of the automaker’s stock at this point as a potential slowdown is already factored into our models. We note that Sollers continues to outperform the market, with sales increasing 11% YoY in September and 21% YTD. Ford sales (carried out through Ford Sollers) saw a notable deceleration in September (+2% YoY), but YTD growth stays at 17%. We are reiterating our Buy recommendation for Sollers (12-month Target Price of USD 32, 51% upside potential).
GAZ's sales of LCVs remained flat, both in September and YTD. However, we continue to believe that the company is more focused on margins than on absolute volumes, as supported by the recently published 1H12 IFRS.
We remain negative on AvtoVAZ, which saw sales in Russia fall 1% YoY in September and 10% YTD.