Page 169 - RusRPTMay21

Etalon also provided its operating guidance for 2021, which assumes flat sales volumes y/y (538,000 square meters), a 10% y/y growth in sales in value terms to RUB88bn and a 10% y/y growth in cash collections to RUB90bn.
The sales results came in below our expectations, as strong sales in 2020 and a lack of new launches prompted a shortage in the company’s real estate supply and a sequential decline in sales. While we admit that the company needs to replenish its portfolio and deal with its land deficit, we are looking for more clarity about the quality, price and other features of Etalon’s potential acquisition targets. We believe that the share price could remain under pressure until more information about a possible deal is unveiled and the stock overhang risk is mitigated.
9.2.5 Retail corporate news
Magnit released robust 1Q21 IFRS results, with the EBITDA margin of 7.0% delivering on consensus estimates amid the slowing top line.
Revenue growth decelerated to 5.8% y/y, from 10.6% y/y in 4Q20, on the increasing comparison base, while the key pressure came in the last two weeks of March (down 4.6% y/y). The gross margin was flat q/q, but gained 70bp y/y to 23.4%, mostly on improvements in shrinkages and promos. This strength was channelled to the EBITDA margin, that gained 100bp y/y to 7.0% from modest levels, but we note the tight cost control. Similarly, X5 slowed to 8.1% y/y in 1Q21, from 12.7% y/y in 4Q20, but kept EBITDA margin flat y/y at 6.9%. We note Magnit’s work with inventories and NWC (down 5-8% y/y) that supported cash flow and kept leverage at 1.4x, supporting the aggressive dividends (12-mo yield of 10%).
The growth rate in 1Q21 slowed from 10.7% y/y in January to 7.4% y/y in February and 1.8% y/y in March. The key reason was the elevated base of last year (March was up 21% y/y) on the stock-ups and lockdown launches. LFLs were 3.4pp q/q lower at 4.1% y/y while the composition remains strongly distorted, with a 14.9% y/y ticket increase but 9.4% y/y traffic outflow. Magnit kept the decent pace of its roll-out, with 336 net openings resulting in a 4.5% y/y selling space advance. Adjusting for stockpiling and the leap year effect, the company estimated its 1Q21 revenue expansion at 10.9% y/y, slightly higher than in 4Q20.
The gross margin gain of 70bp y/y and its q/q sustainability at 23.4% was promising to us and drove the performance down the lines.
169 RUSSIA Country Report May 2021 www.intellinews.com