Page 140 - RusRPTMar21

The start of the year creates downside risks to our 2021 revenues forecast (+14% y/y), whilst the future trends are dependent on the possible evolution of the pandemic and related restrictions. The core downside risks are high working capital, which we estimate at 157% of LTM sales as of December 2020, and leverage, as net debt had reached RUB13.1bn as of YE20 (+5% y/y). The latter returns 5.9x net debt/ EBITDA, if applied to our forecasted model.
Our focus is on the rebound in turnover and cash flow optimisation, while a significant change in the assortment and rapid multi-format transition could make the process more complex, in our view. We await the full set of 2020 financials and guidance for this year, which are to provide a broader picture of OR Group’s current liquidity situation (to be reported from 1 -16 April).
Magnit released its 4Q20 IFRS results. The top line was up 11% y-o-y to R407.2 bln, in line with our forecast. LFL growth came in at 7.5% (versus 6.9% in 3Q20). The retailer added 410 stores (net) during the quarter, including 212 convenience stores - a massive uptick from the 118 net addition in 3Q20 and a negative figure in 1H20. The full-year net addition of 289 surpassed the company's guidance of 250.
The gross margin declined 50 bps Q-o-Q to 23.3% due to seasonality and an increased share of promotions. SG&A expenses (excluding depreciation) were seasonally down Q-o-Q to 16.3% of revenues. EBITDA was R28.6 bln for a 7.0% margin. Net interest expenses were massively down Q-o-Q to R2.9 bln (below our estimate), while the company also recognized a R0.4 bln FX gain. Hence, net income reached R11.1 bln, 7% above the consensus.
For the full year, capex declined to R32.1 bln, while there was a R30.5 bln working capital release. Full-year FCF therefore came in at R85 bln (versus negative R1.4 bln in 2019), well above our estimate.
The 2021 guidance entails 2,000 gross store openings (all formats) and 700 renovations. Capex is envisaged at R60-65 bln, with an increased focus on the supply chain and IT. The company said its dividend capacity is high given the 2020 results, but the aim is to distribute an amount that can be sustained in future periods. We anticipate a payout of around R50 bln for an 8% yield. Trading was strong in January, with revenues and LFL sales growth in line with the 4Q20 figures at a respective 10.4% and 7.5%.
The results were strong but were in line with our estimates and the consensus forecasts. We regard FCF as the key positive development, though we expect it to normalize to R40 bln in 2021. We remain neutral on the stock until we see the magnitude of the expected top-line slowdown in March.
Magnit management announced accelerated growth plans to boost market share and believes in further improvement of profitability across all formats. In L-T, focus will be on CVP, higher sales densities, high return for
140 RUSSIA Country Report March 2021 www.intellinews.com