Page 116 - RusRPTJul20

Russian internet major​ ​Yandex​ in partnership with Hyundai Motor CIS and Hyundai Mobis, will launch 100 driverless Hyundai Sonata vehicles on public roads in Moscow and the US in 2020​, Kommersant daily reported citing Yandex representatives. As reported by bne IntelliNews, Yandex is Russia's leader in driverless technology. The addition of another 100 vehicles would mean almost doubling its fleet of 100 driverless cars, that have already accumulated over 2mn miles on public roads. Kommersant quoted a Yandex representative as saying that on a three-year horizon, a new self-driving car would be more efficient on a cost (compensation) basis than two drivers working in eight-hour shifts. Yandex is effectively the only company in Russia working on the Level 5 automation at this scale, VTB Capital reminded on June 4. VTBC estimates that net driver earnings could amount to over a third of bookings (excluding VAT) in Yandex’s ride hailing business (Yandex.Taxi), which compares with the estimate of the company’s effective take rate of 12% in 2019. The bank also believe that the economics of self-driving cars will keep improving on lower hardware costs (primarily LIDARs). "Coupled with potential ‘fifth-screen’ revenues (SDCs are seen as a new platform for advertising, shopping, entertainment etc.), we believe that the new technology represents a multi-billion-dollar business opportunity in the long term, which more than justifies front-loaded investments," VTBC argues. To remind, Yandex tripled its investment in driverless y/y to $23mn in 2019. In the best-case scenario VTBC sees self-driving cars as local taxis on public roads as early as 2023, provided the necessary regulation is in place. The bank reiterated the Buy recommendation on Yandex with 12-month target price of $53 per share implying an Estimated Total Return of 29%.
Yandex.Taxi’s​ ride-hailing GMV business was improving in May​. Self-driving remains the technological pride for the company, reaching another mileage milestone in May and will shortly be launched. BCS GM hosted a client call with Yandex.Taxi IR Katya Zhukova in the middle of June. Ride-hailing business model (regardless of COVID-19):
o Variable costs (2/3 total costs) – driver and customer incentives, transaction costs. Fixed costs (1/3) – mainly staff costs, advertising.
o Despite some loss of market share in Moscow in April, primarily due to municipal restriction of premium tariffs (relatively high share in Yandex.Taxi GMV), the company managed to gain part of it back recently and is confident it will at least maintain its share in the longer term.
o Reiterated what was said on Yandex’ 1Q20 call – in Moscow, 60% drop in GMV in April. There was some bounce in May and we (BCS) believe the company should see further recovery in June as the lockdown in Moscow is being lifted.
o Last-mile delivery services. Yandex.Taxi is currently working with a number of e-commerce and offline retail players – too early to judge, but could be an interesting area to expand in even after COVID-19 concerns pass.
o On food delivery from restaurants (Yandex.Eats), unit economics have seen further improvement in recent months (same was said on Yandex‘s 1Q20 call) and Yandex.Eats still gained some market share
116​ RUSSIA Country Report​ July 2020 ​ ​www.intellinews.com