Page 174 - RusRPTMay21

with a Buy rating and note growth, margins, and returns as unmatched in Russian retail.
· Fix Price – the fastest growing retailer in Russia of its size, with 2021F sales growth of 30% YoY and a 2021-25F sales CAGR of 24%. Sales, EBITDA and net income are set to more than triple by 2025F.
· Fix Price is the leader on the variety value retail market, holding a 93% share in Russia; we expect the company to keep its leading position, as it is 13x bigger than all the other players combined.
· Asset-light model: all outlets are leased, with 62% of lease contracts under one year, all set in RUB (51% have fixed terms). Capex was less than 4% of retail revenues as of 2020; store payback is around nine months.
· Net working capital was some RUB 1bn as of 2020, which resulted in positive FCF generation of RUB 16.6bn for 2020 and a net debt position of RUB 23bn at YE20 (IFRS 16); the dividend payout is more than 100%.
· Fix Price went public on 5 March at a price of USD 9.75/GDR, implying market capitalisation of USD 8.3bn. The deal was all secondary and shareholders raised USD 1.7bn. The current freefloat is 21.3%.
· Key downside risks are a hit to the economy and/or RUB, greater rivalry in VVRM, and the sustainability of returns.
The net profit of Russian retailer Lenta plummeted by 58.7% on the year to 1.317bn rubles in January–March, as calculated under International Financial Reporting Standards (IFRS), the company said in a statement on Monday. Total sales contracted by 1.2% to 107.312bn rubles, with retail revenue shrinking 1.5% to 105.881bn rubles. Earnings before interest, taxes, depreciation, and amortization (EBITDA) went down 26.9% to 6.666bn rubles.
OR Group’s 2H20 financial results showed a rebound. Revenues declined 18% Y/y (vs. 26% Y/y in 1H20) on restrictions being lifted and stores opening, while the EBITDA margin recovered from 11% to 28% (30% a year ago).
Working capital was the prime drag on the results, growing 12% Y/y to RUB19bn and 174% of sales, while leverage spiked to 5.5x net debt / EBITDA (from 3.3x as of YE19) to the level of the existing covenants (met as of YE20). The stock has lost 5% YTD and is close to its historical low and trading on 5.7x 2021F EV/EBITDA. We factor a 17% Y/y top line recovery in 2021F and see a distant opportunity for a rerating once leverage and net working capital ease.
174 RUSSIA Country Report May 2021 www.intellinews.com