Magna International Inc’s (Magna) 3Q 08 sales underperformed our expectations, primarily due to lower than anticipated sales from its key segments, including North American Production Sales (NAPS) and European Production Sales (EPS). We expect Magna’s sales growth to remain subdued over the next 2 years, considering the anticipated subdued sales growth in its core markets; Europe and the US, in light of recession in these regions. In addition, we believe Magna’s limited customer base will apply further pressure on its sales growth. Moreover, emerging markets such as China and India, which are expected to be key sources of revenues, are now expected to experience a moderate pace in demand for automobiles, associated with the slower economic growth now expected in these regions. We also expect margins to remain under pressure, associated with the subdued revenue growth in FY 2008 and FY 2009. However, we expect partial recovery in revenues and margins from FY 2010 onwards, resulting primarily from improvement in global economic conditions.

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