Forecasts of the 20 most attractive stocks for investments were made before the sad events of plunge of world stock markets that also influenced the Russian stock market. The wave of sales changed much, but markets of the developing countries are still more attractive. Forecasts for the Russian companies remain relevant and their growth will possibly be higher than predicted before. Russia did not suffer directly from a mortgage crisis in the USA; the indirect influence is rendered by deceleration of world economy.
Plunge of the Russian stock market was predetermined by external factors. There is no negative within Russia. Some analysts have already hastened to predict good growth in 2008 relying upon such factors as political stability in Russia and high enough oil prices.

It would be possible to have four times capital gain, if you have invested into the stocks of Uralkali at the beginning of 2006 – who would suggest that. Russian Magazine “Finance” presents 20 guidelines with the highest growth forecasts for 2008.

World financial markets enter the new year in a grip of crisis, extend and duration of which are still difficult to assess. Against this background Russia looks confident enough with quick pace of GDP growth, exchange adjustments and significant money reserve. One more argument “for” for investors is declining of political uncertainty in Russia. With such advantages Russian stock market will likely grow in 2008. But what stocks will rise more than others? Trying to answer this question Magazine “Finance” consulted to the analysts. Certainly, their prognoses may not be realized, this happens time after time. But journalists of the magazine tried to eliminate not reliable guidelines.

“Blue chips”

According to analysts, some representatives of gas-and-oil production industry, which during the expiring year were losing dynamics of stock market, have quite a good growth potential: Surgutneftegaz and Gazprom. The securities growth of gas and oil monopoly is in some way promised by the majority of analysts. Surgutneftega” even became the leader among “blue chips” – 71 % of growth. From the main point of view capitalization can be positively influenced by implementation of Surgutneftegaz intentions of field development in the Eastern Siberia. The stocks of RAO “UES of Russia” may also become a little less profitable investment.
But in general perspectives of the majority of “blue chips” are gloomy. Few of analysts promise their growth for more than 20-25 %. Most likely, securities of the first echelon are no longer the worthy object for mid-term deposits. There is disagreement even on the issue of the emitters which were included in the list. For example, by no means all analysts see the growth potential of VTB Bank.

At the first items

In search of high yield investors should pay attention to “the second echelon” securities. Among the most liquid papers there are enterprises of Bashkir fuel and energy complex, Dalsvyaz, Chelyabinsk Zinc Plant. In the over-weight position there will be petrochemicals, ferrous metallurgy, trading networks, a fixed-line telephony, propulsion engineering. But opinions of analysts are divided as for perspectives of the second echelon. The main precondition for the growth is increase of financial indices of the majority of the companies, their consolidation. At the same time the risks are higher with the stocks of the second echelon, the securities of notoriously lower liquidity are more difficult to be sold, and minority stockholders of such companies are less protected.

There is reason for an investor to pay attention to securities of Mega Regional Telecom (MRT) – subsidiaries of Svyazinvest”. Stocks of Dalsvyaz, Sibirtelecom and VolgaTelecom look particularly attractive, their growth potential is 65 %, 74 % and 77 % respectively. Probable growth is explained by active developing of new services and cost cutting. Stocks of Cherkizovo Group can increase because of raise the standard of living in Russia and consumption meat foods. “People won’t stop eat sausage, that means, the company will grow”, jokes Tatyana Bobrovskaya, the analyst of BrokerCreditService, furthermore the incomes of the population of Russia permanently grow.

Contradictory evaluations

However, whether it is necessary to comply with the recommendations? Against this practice is the fact of frequent errors of fundamental analysis. Active players on stock market will right off the bat name at least a couple of cases when respectable analyst made an error in evaluation of perspectives of this or that company.
Remember that it only the opinions of analysts grounded on their evaluation of the future flow of funds of a company. You can agree with their arguments or not. For this purpose we have given both positive and negative sides of each of estimated issuers. It’s up to you to decide.

VTB Bank 59 %
Alexey Zajtsev, Petrocommerce Bank analyst
Forecast – $0,008
Price on 19.12.2007 – $0,00502

VTB is going nearly to double the quantity of the points from 280 to 500 at the end of 2008, Alexey Zajtsev tells. It will inevitably cause consistent growth of retail lending portfolio. It is expected, that according to the results of 2007 this index for VTB will make up 75–85 %. For 9 months of 2007 the lending portfolio of the bank has already grown by 53 % to $46,4 billion. It is a very good dynamics which is not shown in the price of stocks yet, Alexey Zajtsev considers.
Maxim Osadchy from AntantaPioglobal is made restless by government holding of VTB. He says, the economical ineffectiveness is characteristic of state companies. He is skeptical about the perspectives of aggressive development of the bank which will divert the significant resources and will reduce profitability. Maxim Osadchy forecasts, that in 2008 assets return of VTB will be twice as low, than average in the sector. Other analysts remind about dependence of VTB on external credits.

Investment company/bank Forecast, $ Potential, % Recommendation
Alfa Bank 0,0059 18 To buy
AntantaPioglobal 0,0057 14 To buy
Sobinbank 0,0069 37 To buy

VolgaTelecom 77 %
Igor Nuzhdin, Zenit FC analyst
Forecast,– $10,1
Price on 19.12.2007 – $5,7

The analyst sees the driver for growth at least in that the company stocks looked bad in 2007. Besides, a risk level of sale of cellular assets for VolgaTelecom is lower, than of the rest MRT. The incomes on them make only 15 % EBITDA, says Igor Nuzhdin. Even in case of their sale the stocks of the company will look undervalued on comparative quotients. In an asset of VolgaTelecom the stake on new services which have already shown quite good dynamics.
Other analysts remind of not too high transparence of business and are traditionally critically estimate effectiveness of a state administration. There is little hope if many people represent the interests of the state company Svyazinvest, thinks Ivan Shuvalov from Alfa Bank.

Investment company/bank Forecast, $ Potential, % Recommendation
UniCredit Aton 7,49 31 To buy
Alfa Bank 8,10 42 To buy
Bank of Moscow 7,36 29 To buy

Gazprom 57 %
Konstantin Batunin, Alfa Bank analyst
Forecast – $22
Price on 19.12.2007 – $13,98

It would seem that Gazprom with its one-third billion dollars capitalization has got the limit. Another view is taken in Alfa Bank. Konstantin Batunin emphasizes, that investments into monopoly stocks are “an optimal investment in the Russian oil and gas sector”. In 2008 Gazprom will get disproportionate benefit from growth of the world prices for oil (they use at calculation of gas value) and forthcoming rise of domestic prices for gas – fares are going to be increased to deter skyrocketing growth of demand.
Opponents forecast smaller growth being afraid of decrease of effectiveness against rise of consumptions. Furthermore, there is a probability of taxation growth – in the government this problem is just examined.

Investment company/bank Forecast, $ Potential, % Recommendation
Bank of Moscow 16,78 20 To buy
Renaissance Capital 19,00 36 To buy
Deutsche Bank 16,00 14 To buy

Dalsvyaz 65 %
Rostislav Musienko, Bank of Moscow analyst
Forecast – $8,69
Price on 19.12.2007 – $5,27

Among interregional companies Dalsvyaz will demonstrate the best growth rates of revenue growth and OIBDA in 2006-2010, says Rostislav Musienko from Bank of Moscow. The company has proved that can struggle effectively for a cost-saving. In 2007 the capital profitability was a little reduced because of “Sahatelecom” acquisition, but in the short run the company will improve the situation.
Cyril Tishchenko from Otkritie recommends selling stocks of Dalsvyaz. He doubts, despite enriching of finance indices, in company capabilities on capital profitableness rise. He says, effectiveness still remains to be the lowest of all MRT. Dalsvyaz actively enough advances new services on which ones 11 % of gain falls. But after comparing with foreign analogs it becomes clear, that the company is overestimated.

Investment company/bank Forecast, $ Potential, % Recommendation
UBS 6,75 28 To buy
Troika Dialog 6,32 20 To buy
Otkritie 4,20 -20 To sell

JSC “Zavolzhsky Motorny Zavod” 66 %
Marina Irkli, Veles Capital IC analyst
Forecast price – $4,12
Price on 19.12.2007 – $2,475

The market undeservedly pays not enough attention to securities of ZMZ, consider in Veles Capital IC. The company has released the quite good reporting for 9 months of 2007 and has shown profit growth by 35 %. Furthermore, the plant has growing stock of orders together with increase in output for GAZ which is one of the main buyers of ZMZ production, Marina Irkli enumerates. Additional plus is that in summer 2007 Severstal-Avto, which includes ZMZ, won the state tender for development of light diesel engine.
Opponents note, that the long-term strategy of Severstal-Avto” in relation to its subsidiaries is not clear yet. There is a probability, that the parent company does not see the particular sense in developing ZMZ. Besides, GAZ gradually refuses from a number of engines produced by ZMZ that also can have an effect on decrease of company indices.

Investment company/bank Forecast, $ Potential, % Recommendation
Uralsib 3,70 49 To buy
Zerich 3,00 21 To buy
Otkritie 3,04 23 To buy

Mechel 39 %
Cyril Chujko, Uralsib analyst
Forecast – $125
Price on 19.12.2007 – $90

Mechel more and more departs from once main steel business to coking coal mining. And recent assets bought in Yakutia (Yakutugol and the Elginsky coal deposit) allowed the holding to be in the top ten of the coal-mining companies of the world. And it is relevant, as there is “the coal rush” on the market, Cyril Chujko says. Even by a stretch of imagination Mechel can be considered as “one of the most cheap coal companies”.
The main risk is a decrease of effectiveness of the company. The cost price grows with high paces, and there is a feeling, that Mechel is unable to control an increase of expenditures. The company is traditionally for metallurgical sector insufficiently transparent, though publishes a financial reporting each quarter. Because of non-transparency it is difficult to estimate long-term perspectives of the company.

Investment company/bank Forecast, $ Potential, % Recommendation
Goldman Sach 112 24 To buy
BrokerCreditService 97 8 To buy
UBS 85 -6 To keep

Novatek 43 %
Anna Znatnova, Alemar analyst
Forecast – $10,3
Price on 19.12.2007 – $7,2

Good dynamics of developing, effective structure of business of the company and low debt load at saving of the present state of energy market create excellent premises for confident growth of capitalization of the company, Anna Znatnova says. The index a debt/EBITDA for Novatek for 2007 made up only 11 %. Compare to the one of Gazprom index – 33 %. The low level of debts gives more capabilities for dividend payout and developing. The company has come to an agreement with Gazprom – the monopoly acquired a share in the capital, having purchased 19,9 % of stocks.
The main threat is the approval of a new scheme of calculation of tax on natural resources production. The representatives of Russia’s Ministry of Economic Development and Trade already said that the indicing and differentiating of tax on natural resources production rate for gas is close. In expenses of Novatek the great part falls on transport charges – 40 %.

Investment company/bank Forecast, $ Potential, % Recommendation
BrokerCreditService 7,49 4 To buy
Renaissance Capital 6,00 -16 To keep
UniCredit Aton 8,10 13 To buy

Polus Zoloto 62 %
Igor Nuzhdin, Zenit FC analyst
Forecast – $70
Price on 19.12.2007 – $43

The market undervalues the gold miner, the analyst is sure. In 2006-2007 the company successfully carried out the strategy on overgrowth of margins. Igor Nuzhdin calculated that now company reserves are estimated only at $91 per ounce. At the same time an average index in the world analogs is about $300. If Polus Zoloto will be able to prove to the market, that it can sharply increase production of gold, and the prices for metal will be saved at least at the present levels, the stocks are simply doomed to growth, Igor Nuzhdin says.
Possible negative change of gold prices can impede the growth. So, according to Goldman Sachs in 2008 the value of trojskaya ounce can go down to 15–20 %.

Investment company/bank Forecast, $ Potential, % Recommendation
Alfa Bank 59,00 37 To buy
Renaissance Capital 55,00 28 To buy
Veles Capital 46,35 8 To keep

Primorsk Shipping Corporation 95 %
Edward Faritov, Renaissance Capital analyst
Forecast – $0,77
Price on 19.12.2007 – $0,395

Developing of the Russian tanker company of the third value is connected with the start of offshore fields Sakhalin-1 and Sakhalin-2, which will lead to the growth of demand for new high-power tank ships. I have calculated the growth of a gain proceeding from the shipping company program on fleet building, Edward Faritov explains. The Company plans to increase deadweight by 150 % to 4 million tons by 2015. The growth of transport of freight volumes will result also in margin growth as the company will start to spare on volumes.
The main risk is the necessity of fleet upgrade because of technical requirements growth for tanker carriages. Investment of great means in up-dating will negatively affect profitability of shipping company.

Investment company/bank Forecast, $ Potential, % Recommendations
Veles Capital 0,561 42 To buy
BrokerCreditService 0,290 -27 To sell
Citybank 0,390 -1 To keep

RAO “UES of Russia” 53 %
Igor Goncharov, UBS analyst
Forecast – $2
Price on 19.12.2007 – $1,31

In the basis of an optimistic evaluation there are two facts. At first, the total value of assets of energy monopoly is 35 % higher, than capitalization of RAO “UES of Russia”. Secondly, a fair price of parts of holding is 15 % higher than the present market evaluation. As a result Igor Goncharov supposes significant growth of stocks before July, 1st, 2008 when as a result RAO “UES of Russia” reforming one share of the company will be charged with of fair price of $2. The analyst takes into consideration news background for the securities which is created. In particular, the chairman of board Anatoly Chubays said, that there is a reason to estimate RAO securities as an assets bundle of assets which is able to show the growth potential.
The main risk for quotations is in possible sale of exchequer stocks at a rate of 7,5 % from authorized capital on an open market. Besides, the future value of assets can appear lower than the present.

Investment company/bank Forecast, $ Potential, % Recommendation
Renaissance Capital 1,57 20 To buy
Bank of Moscow 1,66 27 To buy
Goldman Sachs 1,59 31 To buy

The Seventh Continent 54 %
Anna Kochkina, UniCredit Aton analyst
Forecast – $40,32
Price on 19.12.2007 – $26,2

The Seventh Continent became more active after passive 2006. The company has conducted two big deals: has attached 18 discounts Svetofor and has bought from Dekra 29 supermarkets. We positively estimated bargains and took into account in calculation of the prospective price, Anna Kochkina says. The strong brand, an advantageous locating and variety of formats are positive factors.
Analysts Deutsche UFG, on the contrary, recently reduced evaluation of a fair price of stocks of the chain. The reason is the revision of forecasting finance indices with a glance of paces of new shops opening and rental charge in Moscow. In 2007 the chain opened only 6 new shops instead of stated 25, – Brady Martin from Alfa Bank agrees. On the rates of growth the Seventh Continent is not up to Magnet and Х5 Retail group.

Investment company/bank Forecast, $ Potential, % Recommendation
Deutsche UFG 33,36 27 To buy
Otkritie 32,00 22 To buy
Bank of Moscow 29,72 13 To keep

Sibirtelecom 74 %
Anna Krylova, Antanta Pioglobal analyst
Forecast – $0,2
Price on 19.12.2007 – $0,1152

Analysts of Antanta Pioglobal consider that all subsidiaries of Svyazinvest are undestimated by the market. But the greatest growth potential is promised to stocks of Sibirtelecom. The company is going to develop actively cellular line of activity, a segment of new services, and also aggressively fire employees for efficiency, Anna Krylova says. Powerful cellular segment in the long term will give Sibirtelecom a capability of convergence of tools of fixed-line and cellular telephony.
Other analysts doubt about company potential of provisioning of the new communication services, especially taking into account expected expansion to Siberia of alternative operators. Golden Telecom will stretch optical fiber and will reduce prices for services rendering of Internet access, having overtaken a major market share, Ivan Shuvalov from Alfa Bank is sure.

Investment company/bank Forecast, $ Potential, % Recommendation
Alfa Bank 0,15 30 To buy
Troika Dialog 0,14 22 To buy
Deutsche Bank 0,16 39 To buy

JSCFC Sistema 50%
Anna Krylova, Antanta Pioglobal analyst
Forecast – $58,7
Price on 19.12.2007 – $39,2

Anna Krylov considers unfair existing “holding” discount of Sistema. It is almost absurd situation when the holding costs almost as much as its share in MTS alone, the analyst wonders. And after all JSCFC has other assets, besides the cellular operator: Comstar-OTS, Sistema-Gals, Sitroniks. On Anna Krylova’s point of view, it is possible that it will continue for a long time. Moreover, the company management actively initiates the growth of quotations on the Russian market. The holding has already conducted split of stocks in one thousand times, has employed market makers to maintain quotations.
Opponents remind of investors’ distrust of public assets of Sistema, actually imputing to them the negative value. It is connected to negative experience of appearance at the stock exchange of Comstar and Sitroniks which stocks fell after IPO. The corporate risk is still high, that is non-transparent role of JSFC in creation of subsidiaries’ value.

Investment company/bank Forecast, $ Potential, % Recommendation
Alfa Bank 35,00 -11 To keep
Bank of Moscow 40,99 4 To keep
Deutsche Bank 47,20 20 To buy

Rosneft 61 %
Paul Kushnir, Deutsche Bank analyst
Forecast – $15
Price on 19.12.2007 – $9,3

Deutsche Bank traditionally advises to buy Rosneft stocks. It foreshortened brilliant perspectives of the oil state company in 2006 when represented itself as one of organizers of its IPO. For sure – besides integration of assets of Yukos the company conducts capital works on enlargement reserves of the Vankorsky field, and also builds new oil refineries in Kozmina bay in the Sea of Japan and in Primorsk in Baltic. In perspective Rosneft can get hold of new assets, among which Bashkir oil refinery. On the market they periodically speak about possible Surgutneftegaz amalgamation. At the same time Deutsche Bank notes, that the Rosneft estimation can appear overrated in the case of unsuccessful integration of Yukos assets, especially of processing assets. There is a risk of non-fulfillment by the administration of tasks and plans on implementation of capital investment projects.

Investment company/bank Forecast, $ Potential, % Recommendation
Renaissance Capital 9,60 3,2 To keep
Bank of Moscow 10,82 14 To buy
Troika Dialog 9,20 1 To keep

Surgutneftegaz 71 %
Alexander Burgansky, Renaissance Capital analyst
Forecast – $2,11
Price on 19.12.2007 – $1,23

The analyst considers, the main factor of capitalization growth of Surgutneftegaz is upgrade of refining capacity, and also the beginning of developing of the Talakansky field in the Eastern Siberia. Besides, the company intends to implement 3–4 deposits annually. It should lead to significant growth of value, Alexander Burgansky says.
Opponents from Bank of Moscow point up that Surgutneftegaz is the most obscure and closed company in sector of the largest holdings. It is not clear, who controls the company. Investors are not able to understand the structure of internal cash flows of the CIS. Perspectives can appear to be too optimistic. Experts doubt, that by means of Talakan it will be possible to compensate decline of production in the abandoned fields in the Western Siberia.

Investment company/bank Forecast, $ Potential, % Recommendations
Bank of Moscow 1,31 6 To keep
Troika Dialog 1,40 14 To keep
Deutsche Bank 1,17 -5 To keep

TNK BP Holding 58 %
Alexander Burgansky, Renaissance Capital analyst
Forecast – $3,33
Price on 19.12.2007 – $2,11

The joint English-Russian company develops quite actively, trying to incease investment into new deposits, including development of Kamennoe field. Till 2011 it is planned to invest in it $800 million. In terms of volume Komennoe is comparable with Uvatsky group of fields which is considered to be strategical for TNK BP. Due to their development the company will be able to solve the set task of oil extraction at the level of 2,5 % a year and to achieve profitability growth for some percents more. Trading indices of the company are more than confident, as the analyst writes in his report. At the same time TNK BP has larger than competitors risks of complication of relations with the state. Analyst suggest to recall, as in 2006 stockholders of the company had to pay in addition to the budget for adjustment of tax claims for $1,5 billion

Investment company/bank Forecast, $ Potential, % Recommendation
Otkritie 2,30 9 To keep
Rye, Man AND Gor 2,25 7 To keep
UBS 2,40 14 To keep

UfaNefteKhim 71 %
Vladimir Vedeneyev, Bank of Moscow analyst
Forecast – $5,9
Price on 19.12.2007 – $3,45

The stocks of Ufa petrochemists went up due to appetites of the state company Rosneft. In point of fact, in behalf of it the state tries forejudge from Bashneft a part of processing assets including UfaNefteKhim. After probable nationalization in 2008 the control stock of this attractive asset can go to Rosneft. In that case minoritaries can get the offer for the buy-out of stocks belonging to them for the price, close to the fair one. Besides, there is a possibility of conversion of securities into Rosneft stocks – by definition liquid and less risky. Vladimir Vedeneyev pays attention that UfaNefteKhim” works in processing conditions that is why present finance indices of the company are far from the actual. Again, the situation can change with coming of the new proprietor.

Investment company/bank Forecast, $ Potential, % Recommendation
Troika Dialog 4,72 37 To buy
Antanta Pioglobal 85 12 To keep
BrokerCreditService 3,52 2 To keep

CenterTelecom 62 %
Alexey Jakovitsky, Deutsche Bank analyst
Forecast – $1,46
Price on 19.12.2007 – $0,9

Alexey Jakovitsky gave a new forecast of growth of CenterTelecom stocks after report publication for 9 months of 2007. He was struck by the gain growth, which was one of the highest among the interregional companies. In ruble counterpart it has increased by 16 % while Deutsche Bank forecasted only 14 %. So, incomes from services rendering of Internet access increased by 58 %. Effectiveness also increased, material costs decreased by 2 %, Alexey Jakovitsky notes.
Despite quite good outcomes for the current term, Cyril Tishchenko from Otkritie recommends to sell stocks of CenterTelecom”. In 2004-2005 the company demonstrated a dead loss and only in 2006 its profitability made up 6 %. He considers, that in a short-term perspective there is no significant growth of a net profit.

Investment company/bank Forecast, $ Potential, % Recommendation
Renaissance the Capital 0,60 -33 To sell
Bank of Moscow 1,12 24 To buy
Otkritie 0,75 -17 To sell

Chelyabinsk Zinc Plant 65 %
Dmitry Skvortsov, Bank of Moscow analyst
Forecast – $20
Price on 19.12.2007 – $12,15

In 2007 the stocks of Chelyabinsk Zinc Plant showed themselves to disadvantage if compared to other companies of nonferrous metallurgy, that was conditioned by an adverse conjuncture, as the prices for zinc were reduced. Dmitry Skvortsov hopes that in 2008 the fall will stop, moreover, the small growth is expected in the first half of the year. The company actively buys deposits that will allow sparing essentially on costs. So, for the beginning of 2010 Chelyabinsk Zinc Plant intends to provide completely itself with raw. As yet provision with zinc is only 20 % that negatively affects profitability of the company. Furthermore the analyst of Alfa Bank Maxim Semenovyh forecasts reduction of prices for zinc: from $3400 in 2007 to $2900 in 2008.

Investment company/bank Forecast, $ Potential, % Recommendation
Troika Dialog 15,2 25 To keep
Alfa Bank 18,0 48 To buy
Prospect 17,6 45 To buy for the whole 2006

Cherkizovo Group 56 %
Tatyana Bobrovskaja, BrokerCreditService analyst
Forecast – $22,2
Price on 19.12.2007 – $14,25

The growth potential for Cherkizovo Group papers brings favorable conditions to the market of meat products: a quota on import, a growing demand and lower costs of production in comparison with the foreign companies. The high prognosis is connected to expectations of significant growth of sales volumes, by the means of putting into operation of new powers, the analyst of BrokerCreditService Tatyana Bobrovskaja comments. According to the reports, for 9 months of 2007 the company has demonstrated significant growth of gain and profitability.
Brady Martin from Alfa Bank also forecasts, that Cherkizovo will soon surprise with high indices of profitability. He says, that they recommend selling, the stated expansion of capacity, the favorable price conjuncture and short-term rise of profitability are more than included in the price.

Investment company/bank Forecast, $ Potential, % Recommendation
Renaissance Capital 20,10 41 To buy
Otkritie 18,34 29 To buy
Alfa Bank 12,60 -12 To sell

All forecasts and estimations about the companies’ stocks were made on the Russian stock exchanges RTS (Russian Trading System) and MICEX (Moscow Interbank Currency Exchange).