Following a down-tick in October, the underlying momentum in car sales improved slightly, mainly thanks to foreign brands (in its premium segment; WDA YoY growth in foreign car sales returned to the black for the first time since February 2013), according to our macro team. November's YoY advance looks reasonable given deferred demand for NY sales in combination with the favourable base effect (in 2012, car dealers introduced promotions earlier in September-October due to imminent economic risk). December is likely to follow in November’s footsteps, with the contraction in car sales decelerating further. Nevertheless, we believe that the improvement reflects the more favourable base effect rather than any sustainable improvement in car sales.
Standalone Sollers' sales fell 22% YoY in November, mostly driven by a 30% decline in UAZ sales. Meanwhile, SsangYong sales fell 3% YoY in November. Overall, Sollers' sales were down 8% YTD. We also highlight the persistent weakness of Ford Focus sales (-34% in November and -28% YTD), which resulted in Ford sales (carried out through the 50:50 JV with Sollers) falling 20% in November and 19% YTD. While the positive trend in Ford sales excluding the Focus continues, this was still not enough to offset the poor performance of the Focus. We believe that this continues to weigh upon Sollers’ stock, which remains our top pick in the Russian automotive universe due to its undemanding valuation.
GAZ’s LCV sales fell 21% in November and 7% YTD. We are reiterating our Hold recommendation on both ords and prefs.
AvtoVAZ’s sales were down 19% in November and 16% YTD. We are reiterating our Sell recommendation on ords, while our Hold recommendation on prefs is due to the widening of their discount to ords.