Page 138 - RusRPTNov20

Terminating it will allow X5 to focus more on rolling out its own logistics operator, 5Post, which delivers packages from online stores and is to increase the number of parcel lockers after the break up by 1,112 to a total of 4,000. That would make it the third largest operator after Ozon (over 6,000 parcel lockers) and Pickpoint (4,800 own locations). In its strategy, X5 plans around 10,000 parcel lockers (including pickup points) as a medium-term target, which covers roughly half of the outlets in our model, fuelled by the rapid development of e-commerce. New businesses in the areas of online trade and delivery are important pillars of X5’s strategy and we think they will account for 20% of turnover by 2029F. Key examples include being the leader in terms of egrocery, with a 15% market share in 1H20, delivery platform 5Post (third spot in Russia in parcel lockers) and courier service Okolo. X5 is to hold a capital markets day on 27 October. We anticipate updates on its main strategy points and the progress towards its targets.
Detsky Mir​ released its 3Q20 trading update on October 14. Revenues rose 13.5% y/y to R38.5bn in the quarter. ​This implies that top-line growth slowed somewhat in September from the previously reported 15.1% in August and 13.9% in July. We would attribute this to a high base and relatively warm weather during the month. LFL sales growth came in at 3.9% in 3Q20 on 6.0% LFL ticket growth (presumably due in large part to ruble depreciation) and a 2.1% decline in traffic. Online sales surged around 140% y/y to R8.0bn, or 21% of total revenues. The company opened 10 Detsky Mir stores in 3Q20, but it closed all 52 of its ELC and ABC stores, so the total store count fell to 810. In the press release, the management noted that it expects EBITDA growth of at least 20% y/y in 3Q20, which is slightly above our projection. The 3Q20 numbers were strong, though broadly in line with Sberbank forecasts. Despite all of the challenges of 2020, Detsky Mir has managed to maintain decent LFL sales growth and continues to gain market share (according to our estimates). Its financial results have also held up well. The rollout of the three growth projects Detsky Mir presented at its recent capital markets day - Zoozavr, ​Detmir.ru​ and the marketplace - will help the company move into new market segments and geographical areas, which should help it retain its growth momentum. The projects should also safeguard the company from online competition and help it maintain a strong ROIC. Detsky Mir currently offers a 9% dividend yield over the next 12 months. We reiterate our BUY recommendation on the stock.
Lenta​, one of Russia’s largest retailers, reported its 3Q and 9M operating results on October 21. ​Vladimir Sorokin, Chief Executive Officer or Lenta, commented: "While 2020 has been an unprecedented year for the retail industry, I am extremely proud of how swiftly and efficiently Lenta has adapted to the ever-evolving market conditions due to Covid-19. At all times we have made the safety and well-being of our employees and customers our highest priority. These measures have paid off as local authorities didn’t close any of our stores and consumers felt it is safer to shop at Lenta. As a result, some
138 ​RUSSIA Country Report​ November 2020 www.intellinews.com