Page 124 - RusRPTSept21

The CEO’s contract is for 3 years, and expires in 2023. He noted that he was comfortable working with Aeroflot’s CEO Mikhail Poluboyarinov. We think that his contract will be renewed, as we see his contribution to the lowcoster defining its current success.
Aeroflot's stock trades at 2023F EV/EBITDA of 4.4x, a 20% discount to EM peers and a 14% discount to its historical 3y average. Buy reiterated.
9.1.4 Construction & Real estate sector news
Russia’s real estate sector’s results spiked in 2Q21 as the quarter enjoyed the final support from mass-subsidised mortgages and the low comparison base (in 2Q20, lockdowns pressured volumes and construction froze).
Mortgages doubled y/y in 2Q21 and surged 75% y/y in 1H21, while credit deals were close to record highs (75%) in the sales of listed developers. As a result, demand increased, with primary deals surging 2.5x y/y in Moscow and adding 37% y/y in St Petersburg, while prices gained 35% y/y to RUB221,000/sqm and RUB171,000/sqm, respectively.
For the near term, we expect the sector to cool, as mortgage subsidies were downscaled, interest rates are higher (the key rate is up 225bp YTD to 6.5%), demand was strongly up-front loaded, and the consumer is fragile. Wide portfolios and rapid strategies allow us to keep intact our 2021-25F volumes for PIK, and to raise them 11% for Samolet on the company’s recent breakthrough.
We have trimmed them 6-10% for LSR and Etalon. Our 12-mo TPs were: up 22% for PIK to RUB1,400 (ETR 22%; Buy); up 65% for Samolet to RUB2,800 (22% ETR; upgraded to Buy from Hold) on the dynamic development of its business guided; down 6% for LSR to RUB800 (10% ETR; Hold); and down 7% for Etalon to $1.70 (ETR 11%; Hold). Etalon and LSR are vulnerable to sector cooling, while the latter’s stock is to be more resilient, due to the buyback of 10% of the share capital.
· Subsidised mortgages were a key driver last year, and we see lower limits (RUB3mn in the capitals vs. RUB12mn before) and the 50bp rate uptick to 7% as only being partially offset by family mortgages from 1 July.
124 RUSSIA Country Report September 2021 www.intellinews.com