Page 107 - RusRPTNov18

(net saleable area) dropped 24% to 2.1mn m2, equivalent to around four years of construction. At the same time, due to projects being in a later stage of construction, their market value per m2 was up 29% from the end-2017 level to RUB58,000. Based on the published sales estimates, St Petersburg, Etalon's home market, was holding up better than Moscow. The average price per m2 was up 2%, versus a 4% decline for the capital city. The strongest performers among projects were Galactica, Samotsvety, Summer Garden and Petrovskaya Dominanta. House on Blyukhera, Okhta House, Etalon on the Neva and Emerald Hills, on the other hand, were the laggards.
Etalon has posted a strong the third quarter of 2018 trading update, with a 40% y/y rise in sales and 35% growth in volumes . The volumes reflect strong market demand and the modest comparison base of the previous year. Apartment prices increased 10% y/y, reflecting early summer hikes, project maturity and impressive demand from clients. In order to better reflect strong YTD operating results, management has raised its sales guidance 6% to RUB 60.2bn, which implies a 20% y/y growth in sales and creates upside risk to our model (we expected RUB 57bn). The company has scheduled a conference call for today at 14.00 London time at +44 (0)330 336 9411 (Conference ID Code: 5309128). We reiterate our 12-month Target Price of $3.50 and Buy recommendation on the 55% ETR it implies. Impressive results and guidance revision. Rouble sales reached 16.8bn in the third quarter of 2018, increasing 40% y/y, on the back of residential volumes growth to 154,100 sqm (35% y/y growth). Volumes gained due to the moderate comparison base and rise in market demand. Apartment prices climbed 10% y/y, due to growing demand from clients and the maturity of its projects. Etalon has raised its previous guidance 6%, to RUB 60.2bn, which presumes that sales in the fourth quarter of 2018 would be comparable y/y, due to management adopting a conservative view of the fourth quarter of 2018.
LSR Group (LSR) has released impressive the third quarter of 2018 operating results, with residential sales growing 57% y/y to 262,000sqm and the value of contract sales up 63% y/y. The company has already met around 70% of its guidance for volumes and contact sales for FY18, creating upside risks to our model. These strong results are due to the low comparison base and new product adjustments, which are starting to show that the company can reach the true sales potential of its portfolio, in our view. LSR demands a P/NAV multiple of 0.5x (vs. 0.4x of Etalon and 1.1x of PIK). Our 12-month Target Price for the company is $3.70/GDR, which implies an 97% ETR; Buy reiterated. Strong operating volumes. Sales of residential estate surged 57% y/y during the quarter, to 262,000sqm, vs. our annual forecast for a 9% y/y recovery (700,000 sqm) and management’s guidance of 31% y/y growth (840,000sqm). The value of contracts reached RUB 26.2bn (63% y/y growth), vs. our full-year forecast of 12% growth (and 35% y/y growth guided by the company). We note that these impressive results can be attributed to the low comparison base of the previous year, when the company was revising its product offering. In terms of geographical coverage, Moscow volumes doubled y/y, while StPetersburg showed 41% y/y growth (across all segments) and Ekaterinburg was also up 41% y/y, due to the favourable product mix, which was revised in order to target the needs of every specific region, according to the company. Overview of other segments. Construction volumes declined 56% y/y to 114,000sqm in the third quarter of 2018, reflecting higher demand for services for houses at the early stages, additionally pressured by the disposal of a pre-fab facility in Moscow in mid-March. Sales of sand and crushed granite surged 53% y/y and 18% y/y, respectively, reflecting an
107 RUSSIA Country Report November 2018 www.intellinews.com