Page 158 - RusRPTSept21

that was not offset by tight cost control (SG&A of sales down 60bp YoY to 17.5%). Thus, the EBITDA margin lost 60bp YoY to 18.7%, based on IFRS 16 (and 14.1% on IAS 17). Net income still gained 9% YoY to RUB 9.8bn and became the base for dividends (a 2% semi-annual yield) with the record day on 24 September. In 1H21, the company delivered net operating cash flow of RUB 10.5bn and employed RUB 3.8bn in capex, putting leverage at 0.5x net debt/EBITDA.
Forecast revision. The base for revenues and cost pressure came ahead of our model and we trim our estimates. We now factor 2H21F revenue growth of 25% YoY (up 36% YoY in 2H20) that results in a 2021F top line expansion of 27% YoY (vs. 30% YoY before). We also take a more conservative view on profitability and lower the 2H21F EBITDA margin 100bp YoY as cost drivers are unlikely to ease in the near term. Overall, our EBITDA and EPS are cut a blended 9-11% for 2021F and similarly for the medium term.
Valuation. In our multiple base valuation, lower 2021F EBITDA is partially offset by a 3% stronger USDRUB assumption, while the EV/EBITDA for global variety value retailers is 8% lower (15.5x). Thus, we trim our 12-month TP 11% to USD 12.50, which now points to an ETR of 63% and an unchanged Buy recommendation. After the 17% stock correction in the last three months, we note the already appealing multiples for 2022F (8.7x EV/EBITDA and 16.7x P/E), the fastest growth profile in our Russian retail coverage, we think.
Russia's second-largest retailer Magnit presented a new concept of its Magnit Cosmetics stores, adopting the space to resemble a beauty salon with a wide range of digital solutions and services. The new pilot format has been lanched in three locations in the home region of Magnit of Krasnodar. As followed by bne IntelliNews, in May Magnit said it was in a deal to take over rival Dixy and add over 2,500 supermarkets to its distribution network, almost doubling its size in the process. After the announcement the retailer posted solid top line growth for 2Q21 ahead of Dixy integration, with the drugstores sector showing the fastest growth rate (+14.1% y/y in 2Q21). Droggery stores keeps being the most growing format in Magnit’s family, BCS Global Markets reminds. However, its share is still below 10% in total net sales. "Thus, the news, being potentially positive, should have limited impact to total Magnit’s financials," BCS GM analysts believe, while maintaining a Buy rating on Magnit's shares. With the digital front Magnit is trying to catch up with its rival X5 Group, which emerged as the largest e-grocer in Russia in 2020. Magnit 2021-2025 strategy includes building a leading e-grocery platform capable of
158 RUSSIA Country Report September 2021 www.intellinews.com