Page 152 - RusRPTJun21

4Q20.
· Net loss at RUB25bn. Better than the RUB30bn we expected and the consensus estimate of RUB28bn.
· Adding to the positives, the monthly cash burn stood at RUB7bn, below than RUB10-12bn guided by management, and lower than the RUB12bn in 4Q20.
· Overall, we treat the numbers as strong. We see Aeroflot standing firm, with RUB78bn of cash on hand, a notable improvement in the cash burn, and more than RUB80bn of opportunities on the FI market (bonds and available credit lines).
· We reiterate our 12-mo TP of RUB90 (ETR +29%), Buy. The results might trigger a rerating in the stock, which has been an underdog for a while now.
Aeroflot reported 1Q21 RAS accounts:
● Considering that 1Q is typically the weakest for airlines, Aeroflot's 1Q21 RAS, with 11% QoQ growth in revenues and the same net loss as in 4Q20, points to a continued improvement in the airline’s performance and financials.
● The RAS results differ from IFRS, but are still a useful proxy, in our view.
● Revenues fell 42% YoY (-48% to 1Q19) due to the 60% YoY decline in PAX, softened by the recovery in the flight programme and the strong cargo segment (+50% YoY).
● The RAS net loss of RUB 25bn is close to the loss of RUB 30bn which we expect in IFRS. Pobeda might bring positive surprises.
● The net loss was only RUB 9bn higher than in 1Q20. With the closure of international flights announced in Russia on 27 March 2020, 1Q20 was unaffected by COVID.
● Cash at the balance sheet decreased RUB 18bn (vs. RUB 22bn in 4Q20) and now stands at RUB 58bn vs. RUB 76bn (RUB 89bn under IFRS) as of YE20.
● The Deputy Minister of Finance said recently that Aeroflot would be entering the bond markets, which is confirmed by the company getting a credit rating ('ruAA-' by Expert RA).
● Given the significant cash pile on the balance sheet and a reasonable cash burn vs. the COVID-unaffected quarter of last year, we see the coming bonds more as a precaution and a tool to diversify funding sources, rather than a requirement for emergency funding.
● With the domestic market fully restored to 2019 levels, Pobeda has shown impressive results right throughout these COVID times, while Aeroflot has underperformed its international peers by 20pp. We reiterate our Buy recommendation with a 12-mo TP
152 RUSSIA Country Report June 2021 www.intellinews.com