Page 128 - RusRPTOct21

penetrate business, elite, and suburban housing, while new companies (Units for module housing and Kvarta for proptech) areeing considered for spin-off and potential IPOs in the medium-term. In our model, we keep intact PIK’s own development forecast, while we have the contribution from other businesses growing from 27% this year to half of turnovery 2025F (vs. 40% anticipated before). Overall, we raise our 2022-25F net income 13%, while our 12-month Target Price climbs 21% to RUB 1,700. As the ETR is 21%, we maintain our buy recommendation. PIK’s shares trade at 1.5x P/NAV, and enjoy tangible support from the company’s rapid growth prospects and its IT start-ups.
Strategy update. The main theme of the CMD was an evolution of the core development business into a multi-company asset structure that is ready to materially disrupt larger sectors. The company said that the pipeline of signed contracts for fee development and general contracting was over RUB 4.2tn, with an estimated net income of RUB 0.6tn. Our updated forecast covers some 40% of the figure in the next five years. Module housing became a key operating focus, while PIK guided capacity at new production facilities to surge from 50,000 sqm annually from YE21 to 900,000 sqmy 2025F. Management said that technology is to allow the assembling of a nine-storey building in two weeks. The proptech unit is eying a market of RUB 8tn and offers brokerage, sales, and rentals, while the sector lacks an established leader globally. PIK reiterated its 2021F revenue target at +32% YoY, to some RUB 500bn, including a 15% share from fee development and general contracting.
Forecast revision. PIK’s landbank grew 30% YTD to 21.5mn sqm as of June,ut the company’s development business did not see aggressive upgrades from management, and we therefore left intact our pipeline forecasts. We now forecast the contribution from other businesses growing from 27% this year to half of turnovery 2025F (vs. 40% anticipated before); this is the main reason we have lifted our 2022-25F net income 13%. The strong pricing environment in the last year is offsetting cost component inflation, and we see the EBITDA margin as sustainable at 24% in 2021F, while growing efficiency is likely to help the company overcome incremental costs to roll out the new business without profitability dilution.
Modular housing is one of PIK ’s strategy pillars, and its subsidiary, ‘Units’, is following a roadmap for major industry disruption. In this note, we present the takeaways from our visit to its pioneering facility in Moscow. The facility supplies modularathrooms that are fully ready to fit at construction sites. The capacity is 150k units annually and the targeted sales mix is 60% of PIK’s own construction, 25% of the Moscow renovation programme and 15% of the
128 RUSSIA Country Report October 2021 www.intellinews.com