Page 175 - RusRPTMay21

· OR Group and fashion retailers were among those most hit by the pandemic. The key pressure came in April-June 2020, when stores were partially closed and sales declined 55% Y/y. The cash loans business was among the most resilient, with revenues growing 27% Y/y last year and raising their contribution to the total to 25% (from 16% in 2019).
· The revenue pick-up, from a 26% Y/y decline in 1H20 to an 18% Y/y correction in 2H20, still underperformed CCC in our coverage universe (down 11% Y/y and 9% Y/y, respectively) as the latter benefits from its well-structured online footwear store (52% of the total in 4Q20) vs. OR Group’s multicategory marketplace (22%).
· Gross profitability in 2H20 was 3pp Y/y higher at 58%, but was offset by the loss in operational leverage, as SG&A costs as a percent of sales added 7pp Y/y to 27%. Rent was stable Y/y at 9% of sales, and we note some optimisation in the turbulent conditions for tenants.
· The EBITDA margin was a positive surprise, at 28%, slightly below last year but above our forecast of 24%. Net income was RUB868mn vs. our forecast of RUB739mn and a RUB306mn loss in 1H20.
· Working capital is still the prime drag on the investment case, as poor sales and store closures meant that inventories were up 26% Y/y to RUB18.4bn as of YE20. Net working capital added 12% Y/y to RUB18.8bn, reaching a record high 174% of sales.
· Leverage came in line with our model at 5.5x net debt/EBITDA. We see that as a low point and factor an easing to 4.4x by YE21F,as operational conditions stabilise and there are no new store closures.
· OR Group saw revenues decline of 21% Y/y in 2mo21, on the high base of last year and muted demand. We note the weak comparison base for April-June, as last year turnover lost a blended 55% Y/y. We reiterate our forecast of a 17% Y/y expansion in the top line in 2021F.
· The stock is trading close to its historical lows and on 2021F EV/EBITDA of 5.7x. We see a rerating being more distant, while the short-term equity story is muted until inventories have been optimised and leverage eases.
O’Key released 2H20 IFRS results and will conduct a conference call on 8 April.
· Revenue increased 4.8% y/y in 2H20 y/y and 5.6% in FY20 on the back of a 5.4% growth in LfL sales and 0.4% growth in selling space
· EBITDA rose 5.4% y/y in 2H20 and 5.5% in FY20
· EBITDA margin in 2H20 was flat y/y at 9.1% in 2H20
· EBITDA turned to positive Rb784mn in 2020 vs negative
Rb215mn in 2019. EBITDA margin stood at 3%
· O'KEY EBITDA reduced by 1.6% y/y in 2020 with EBITDA margin
175 RUSSIA Country Report May 2021 www.intellinews.com