Page 129 - RusRPTAug21

SG&A remained broadly flat y/y as a share of revenue (20.4%). The retailer mentioned that payroll had decreased 7bps and rent had fallen 15bps, while advertising expenses had risen 26bps y/y. LTI accrual added up to RUB350mn, or less than 0.1% of Magnit’s 2Q21 revenue.
As a result, the reported EBITDA margin was 7.1% (-80bps y/y), which is in line with our and street forecasts. In absolute terms, Magnit’s EBITDA remained largely flat y/y at c. RUB30.3bn, c. 1% above our and consensus forecasts.
Net income slid 6% y/y to RUB12bn in 2Q21, meeting the street’s expectation. Magnit’s bottom line was supported by (1) somewhat lower D&A as a%age of revenue y/y; (2) the 20% y/y drop in net interest expenses; and (3) an FX gain of RUB634mn in 2Q21. The retailer’s ND/EBITDA was 1.2x as of the end of 2Q21 (vs. 1.4x in 1Q21 and 2x in 2Q20).
WC improvements. Inventories were down c. RUB6bn vs. YE20 and c. RUB19.5bn vs. 1H20 despite the c. 10% y/y growth in the retailer’s business and the growing share of drogeries (which have longer inventory days). As a result, inventory turnover improved by 11.2 days in 2Q21 after improving by 7.6 days in 1Q21.
The retailer reiterated its 2021 expansion guidance. Magnit confirmed its intention to open c. 2,000 stores on a gross basis across all formats and to redesign c. 700 stores at a capex of RUB60-65bn, excluding the RUB87.6bn acquisition of Dixy.
MtD trading. Magnit’s CEO mentioned that the retailer’s sales growth in July accelerated vs. the 2Q21 average, meaning a double-digit growth MtD. This is despite the strong comparison base of 2020, when Magnit reported a top-line growth of more than 14% y/y in July. The strong dynamics were reportedly supported by faster space expansion and strong sales at mature stores.
During the results call, Magnit’s CEO mentioned that the retailer is continuing to see its customers trading up following assortment improvements and category management initiatives. The retailer has also acquired new customers from larger formats and non-organized retail. Management believes that with decent control of its promo margin, lower shrinkage and improvements in its supply chain, Magnit should show higher margins y/y in 2H21 (the retailer’s EBITDA margin was 7.1% in 2H20).
The 1H21 results make the retailer well positioned to exceed our FY21 sales forecast (excluding the effect from the acquisition of Dixy). The expectedly solid 2Q21 results and positive business momentum mean that Magnit could exceed our revenue growth forecast of 8% y/y and deliver on our forecasted EBITDA margin of 7.2%. That said, the consolidation of Dixy in 2H21 should give a massive boost to Magnit’s revenue growth, with some dilutive effect on profitability.
129 RUSSIA Country Report August 2021 www.intellinews.com