Page 91 - RusRPTJan22

from downsized mortgage subsidies, rising interest rates and realised demand. Thus, individual housing could became a new growth pillar, due to the extension of subsidised family mortgages (6% rate) on it and growing demand for working from home. The recent proposal by the Ministry of Construction to shift cottage complexes to the escrow scheme could further support the segment's growth.
9.1.5 Retail sector news
Analysts have a positive stance on the Russian retail space for 2022, seeing strong growth opportunities for all names, at a blended 1.2x in sales, with 2022F EV/EBITDA and P/E multiples that are appealing relative to EM peers (blended 5x EV/EBITDA, 10x P/E).
On top of that, all companies are becoming more attractive dividend stories, with an average 2022F DY of 10%. Despite having Buy recommendations for all of the stocks, we prefer Russian food retail companies to non-food names, as uncertainty over lockdowns, QR codes and the threat of ecommerce penetration create more risks for our 2022 forecasts (although they do not undermine our long-term growth assumptions). Within food retail, we see more upside and focus on Magnit, as it offers sales growth twice as high as at X5 in 2022F, plus it has more potential to unlock its internal operating potential (we do not price this in yet, however, since time is needed to prove it).
Our 12-month Target Prices for Magnit are intact at USD 24.50 and RUB 8,000, with ETRs of 68% and 49% pointing to our top pick in the sector. We trim X5’s 12-mo TP 5% to USD 40 (ETR of 58%). In non-food, our 12-mo TPs go down 20% for Fix Price to USD 10, 11% for Detsky Mir to RUB 160, and 25% for M.video to RUB 600, with ETRs of 32-40%. Non-food retailers are down 20% YTD and, despite the reduced forecasts for them, we reiterate Buy ratings across the board. Our choice in the non-food space is with Detsky Mir, as we expect superior operations and dividends to Fix Price and M.video.
Food CPI passes 10% and lifts LFLs. In 4Q21F, Magnit surges sales 32% (16% stand alone) and X5 adds 11%, both at a 7.5% EBITDA margin. The stable share of FMCG in budgets (45%) does not call for higher promos.
Russian retail remains a structural growth story, with the 2021-25F top line, EBITDA and net profit almost doubling and market shares increasing 1.3x. Fix Price is the most rapid over the period, with CAGRs of 20%.
E-grocery is the fastest part in e-commerce and is to rise 6.4x to RUB 2.5tn by 2026F. Traditional chains lag ecosystems in capex allocation and technology development, easing long-term competitive grounds.
91 RUSSIA Country Report January 2022 www.intellinews.com