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group is mulling a private placement or IPO for its digital businesses, with Perekrestok Vprok (which is currently transforming into a marketplace), the Okolo express delivery aggregator and 5Post (parcel lockers) all under consideration. Perekrestok Vprok could be the first candidate for a spin-off, as its GMV might reach RUB 100bn during the next three years. Perekrestok Vprok should become EBITDA-positive in 2021 as well. The total GMV of X5’s digital services could reach RUB 60bn in 2021, according to Mr. Salakhutdinov.
X5 Retail Group plans to open 1,500 stores in 2021. For 2020, the company originally scheduled 2,000 gross openings but that was revised down 25% as a result of pandemic-related issues. During the latest strategy day, management mentioned a comparable rollout plan for next year, while we factor 1,420 net openings in 2021, resulting in YoY growth of 7% in selling space and 8% in revenues. Currently, X5 makes an annual dividend payment and for the FY20 distribution we factor dividends going up 50% YoY to RUB 45bn, implying a dividend yield of 6%. We await details from the company about updates to its dividend policy, while potential semi-annual payments could make capital allocation more uniform. The stock is flat YTD and now trades on 2021F EV/EBITDA of 6.2x, which we see as fair.
X5 Retail Group: Sergey Goncharov, CEO of Pyaterochka, made a number of encouraging statements in an interview with TASS.
· Online demand has grown in October-November amid colder weather and the accelerating spread of COVID-19. As a result, Pyaterochka has delivered c. 20,000 online orders per day in November vs. 300-400 in February. Out of Pyaterochka’s loyal customer base of 36mn, 6.5mn use its digital services.
· The surge in demand for online orders has not hurt offline operations. Customers are opting for less frequent shopping but higher baskets.
· LFL sales are up 9% YoY in November (vs. 8.5% in Q3) and are expected to grow by up to 12-13% in December.
· Customers continue to migrate from HoReCa and traditional retail to the modern format of convenience stores.
· X5's EBITDA margin was up YoY in November and is expected to be higher in 4Q20 YoY (it was 6.1% in 4Q19 post-LTI).
· Pyaterochka is ready to accommodate a possible spike in demand by doubling its delivery capacities.
· Pyaterochka’s express delivery business has almost broken even thanks to soaring demand.
Detsky Mir conference call, management stated that capex spending would amount to RUB2bn for 2020 and RUB4bn for 2021. In the medium term, capex is to amount to RUB5-5.5bn per annum. The 2021-24 guidance
126 RUSSIA Country Report December 2020 www.intellinews.com
