Research Notes

The March publication of Wimm-Bill-Dann's strong financial results for FY 2007 produced a positive impact on the company's stock valuations that have grown by nearly 8% since the beginning of April. Nonetheless, WBD's financial report, as well as the new management's expectations for FY 2008 and forecasts for the company's revenue and EBITDA in 2010, makes the shares upside potential very exciting.

Among the key factors that ensure the company's upside, we highlight the following:

• WBD's revenue in FY 2008 grew more than 38%, which was in line with our forecasts, while net revenue in the reporting period even exceeded our forecast. We improved the forecast for the company's revenue in our model portfolio because of dynamic revenue growth in the Dairy and Beverages segments. As a result, our average annual revenue forecast for 2007-2013 grew by 3%.
• We share Wimm-Bill-Dann management's optimism for the company's new target levels for FY 2008 revenue of 3-3.2 USD bn and EBITDA of 410-430 USD mn. In line with our forecasts, the company's revenue in the current year may grow by 29.7% to USD 3.16 bn, and EBITDA may rise to USD 410.8 mn.
• Among key changes in the company's structure, we are very positive on the centralization of the company's divisions, which help the company reduce administrative expenses and boost sales due to a mid-term synergy effect.
• Additionally, a considerable upturn in the company's forecasts for 2010, which in our view was caused by dynamic revenue increase in key segments and by effective cost control over expenses. As a result, the company's revenue forecast was raised from 4 bn to 4.5 bn USD and EBITDA from USD 600 mn to USD 600-650 mn. The management's forecasts are generally in line with our expectations: we expect the company's revenue to grow to USD 4.4 bn and EBITDA to USD 654 mn by 2010.

We increase our target price for Wimm-Bill-Dann's shares to USD 113.3 as of late 2008. Since the forecast value exceeds the current market value by 37%, our recommendation is BUY Wimm-Bill-Dann's shares.

Sergey Filchenkov

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