Page 157 - RusRPTJun21

Our forecasts also imply that EPAM’s revenues and non-GAAP EPS will increase at a 2020-25F CAGR of 24% and 23%, respectively.
Valuation and risks. We use a DCF model (WACC 8.1%, TGR 4%) to derive our 12-month Target Price. We recalibrated our WACC assumptions and lowered the discount rate 1pp, which reflects the combination of a higher risk-free rate on the back of rising interest rates in the US, the lower cost of debt and lower country risk, as EPAM keeps diversifying away from CIS-specific risks, in our view. The key upside and downside risks are related to interest rates, growth, margins, competition and the potential rotation out of growth names into value stocks.
Qiwi released its 1Q21 IFRS results and held an earnings call 20 May. The company’s adjusted EBITDA and adjusted net profit came in 2% and 3% above consensus estimates, respectively.
Adjusted net revenue for the company’s Payment Services segment lost 11% y/y following the 34% y/y drop in adjusted net revenue in its e-commerce subsegment due to restrictions imposed by CBR in December 2020. Qiwi's management thinks that some of these restrictions could be lifted this summer. However, a large part of these restrictions could become permanent, as MinFin has begun a legislative process in the State Duma to completely ban some cross-border payments. The legislation could be finalized this summer as well.
The impact of the partial suspension of operations in the e-commerce subsegment was offset by the 41% y/y surge in adjusted net revenue from money remittances. This surge was driven by expanding volumes of payments for self-employed markets and a spike in traditional, mostly cross-border money remittances.
Despite the drop in payment revenue, adjusted EBITDA and adjusted net profit were up 23% y/y and 18% y/y, respectively, because of the disposal of the deeply loss-making SOVEST and Rocketbank in mid-2020.
Another major threat to Qiwi's revenue, in addition to the current suspension of operations, is the likely loss of a major part of its revenue from processing sports bets. According to management, Qiwi will probably not be the single payment processor for sports betting in Russia that the state plans to select by September. At the same time, there is a chance that Qiwi could become a provider of acquiring services for the selected processor, which would somewhat limit its loss of revenue.
There was no new information on the legal claims against Qiwi from US investors related to the way Qiwi disclosed the limitations imposed by CBR in December 2020.
157 RUSSIA Country Report June 2021 www.intellinews.com