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margins growth already in 2H20 and continue in 2021 – by several
percentage points (per CFO)
· FY21 guidance: The company usually gives guidance with its 1Q
operating results. Head of Strategy said that 2021 sales will be at least flat in money terms as market conditions remain quite favorable
· Project launches: ZIL Yug or Shagal should be launched in the very near future
· Higher steel prices impact on production costs: Not critical at this stage – only 7% of total construction costs are correlated with metallurgical products
· Debt: Corporate net debt stood at Rb19.6bn of YE20 v Rb22.8mn in 1H20. Gross debt stood at Rb50.5bn as opposed to balance cash (Rb25.9bn) and escrow cash of Rb23.6bn. ND/12M reported EBITDA remained at 1.8x i.e., flat y/y.
Results beat BCSe slightly, but do not call for a revision of our forecasts. We expect PPA adj. gross margin of the development business at 34% in 2020 and within 33-34% in 2021-22 vs 32% in 2019 – i.e., we already model for an expanded margins. The reiteration of dividends at Rb12/share is positive for sentiment, but expected – payment date is likely to be set for end-3Q21/4Q21. We will be closely monitoring the execution of strategy targets announced at the most recent CMD, as those could imply upside potential to our financial forecasts.
Russian real estate company LSR Group (LSR) has released a mixed 4Q20 trading update that revealed a volume decline of 11% y/y, which was more than offset by a 31% y/y price surge. Contracting volumes came after a 33% y/y surge in the previous quarter, which lowered inventories. The 4Q20 number missed our model by 16%, and was 5% below our FY20 forecasts. LSR’s figures lagged those of its peers on volumes (PIK and Etalon were flat and up 45% y/y, respectively), but exceeded them on prices (25% y/y both). Moscow was the LSR geography that suffered most (volumes down 22% y/y in 4Q20), as it saw the tightest mix of products and new offers. Our model factors in a 5% y/y volume expansion for 2021F, and we anticipate more details about the subsidised mortgage programme for 2H21 and the potential pick-up in the new sales launches (down 6% y/y to 787,000sqm last year). LSR stock has been flat over the last three months. It now trades at 0.5x P/NAV, and offers an annualised dividend yield of 8.5%, both of, which look appealing to us. In 4Q20, volumes declined 11% y/y to 236,000sqm, following the strong previous quarter, which enjoyed a 33% y/y surge to 244,000sqm – nearly a record high.Among the prime reasons for the slowdown, we flag a reduced market offer and cooling demand for LSR's projects after the subsidised mortgage programme was prolonged until at least 1H21.The prices over volumes strategy was the most pronounced for LSR: prices surged a blended 31% y/y across the portfolio to RUB143,000 per sqm..The
128 RUSSIA Country Report February 2021 www.intellinews.com
