– As expected, Componenta painted a pretty grim outlook for the FY09. We keep our REDUCE recommendation and EUR 5.50 target price intact as nearly every customer sector’s demand should remain weak or deteriorate in H1’09 and there are no signs of recovery in sight.

– High interest expenses are expected to wipe out lower EBIT effectively and to push the net result in the red. Componenta guides sales to plunge 30% YoY in ’09 and PTP to be significantly lower. Our FY09 estimates for sales are EUR 494.0m (-27% YoY) and for PTP EUR -1.5m. Furthermore, Componenta’s gearing is at staggering 355%, when outstanding capital loan is calculated in interest bearing debt. We have estimated capex to be EUR 12m in ’09. Thus the company should be able to pay debt back by some EUR 20m during FY09 (FY10 gearing est. circa 330%).

– We do not expect demand for off-road and truck sectors to recover quickly. We have revised Turkey’s sales estimates down a bit. Under the difficult situation and heavy debt load, we do not see much of upside for the share in H1’09 as the company’s P/B trades at 1.0 and EPS is expected to fall below zero. Turkish Lira is not forecasted to bring additional positive surprises, since currency is unlikely to weaken much further from the current level (EUR/TRY 2.1). On the contrary, a sudden appreciation of Lira would give an undesired hit to profit margins.

– New volumes may be gained along the year. One of the potential targets is Arvika Gjuteri’s customers, since the company has drifted in a financial distress. However, the potential impact should remain under 5% of net sales in 2009.

– Please find additional information from the attached pdf-file, or directly from the eQ Research web-service: http://research.eq.fi/ViewReport.action?resLibId=24628

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