Page 173 - RusRPTMay21

and contributing 1.7pp to the consolidated quarterly revenue
growth rate of 8.1%.
· Digital business net sales as a share of X5's consolidated net
sales saw the fastest growth in Moscow and the Moscow region, where the share of digital sales for 1Q21 reached 4.0%, up from 3.3% in 4Q20
· X5 continues to expand its express delivery services from Pyaterochka proximity stores and Perekrestok supermarkets. The express delivery service was available from 1,296 stores in 24 regions. Express delivery contributed 52% to 1Q21 revenue of X5's digital businesses
· LfL sales growth was 2.1% y/y vs +5.1% y/y in 4Q20 and vs 5.7% in 1Q20 driven by increased basket (+12.4% y/y) and lower LfL traffic (-9.2% y/y)
· Total number of stores reached 17,959 (+7.8% y/y) as of 31 March
· Total selling space grew by 8.3% y/y
X5 Retail Group reported that it had acquired Mnogo Lososya, a company that operates 25 dark kitchens and four brands, including Mnogo Lososya, Ten Ideal Pizzas, Rolls No. 1 and YAJI. The company delivers c. 60,000 orders per month through Delivery Club, Yandex.Eats and its own courier service. The value of the deal was not disclosed. The acquisition is in line with the company’s strategy to cover a wide range of customer food-related needs not only in conventional retail but also outside of its stores. The move should help X5 to expand into the ready-to-eat delivery market and compete in the HoReCa segment. This will contribute to Kitchen Factory, a service operated by X5 that offers ready-to-eat meals in stores. That said, we note that the deal is insignificant for X5’s business scale.
Fix Price, the fastest growing variety value retailer globally, is set to more than triple in the next five years, from 2020 sales of RUB 190bn and net income of RUB 17.5bn.
It is the absolute leader on the Russian variety value retail market (VVRM), with a 93% market share and over 4,200 stores, and is set to disrupt the retail market at scale.
The company sees VVRM’s potential at 15,500 stores in the next 15 years, while it offers a rapid growth profile (2021-25F CAGR of 19%). The concept, based on constant stock rotation and low prices, has proved its resilience, has limited rivalry with e-commerce and is underpenetrated across Russia.
We see space CAGR at 14% in 2021-25F and that, coupled with LFLs, returns a sales CAGR of 24%, with compelling profitability. We see the leverage as conservative, with targeted net debt/EBITDA below 1x. Our 12-month Target Price is based on 2021F EV/EBITDA for Western peers (16.8x, for IFRS 16) that results in USD 14/GDR and an ETR of 51%. We thus initiate coverage
173 RUSSIA Country Report May 2021 www.intellinews.com