Page 132 - RusRPTOct21

payments, so we do not envisage a material effect on the company.
The focus is now on integrating the acquired Dixy stores, which are toe consolidated from 3Q21. In 2020, those stores generated RUB274bn in revenues, representing 17.6% of Magnit’s total turnover, while implied consolidation would lower the sales gap to X5 from 27% to 8% for 2020. As Dixy’s sales and profitability in 1H21 have not been disclosed, the ultimate impact on Magnit’s financials is our prime focus, while the company sees no material expansion in leverage, sustainable dividend payments and new M&As as potential growth pillars.
● X5
X5 Retail Group has announced its plans to open 3,000 Chizhik stores (its hard discounter concept) in the next three years. Currently, there are 29 stores, with 70 targeted by YE21.
The hard discounter concept represented some 3% of total retail as of 2020, according to Infoline, with the potential to reach 10% in the next five years. The format is becoming more attractive, as its low prices have become more important due to households’ real incomes stagnating. The only major player in the hard discounter market is Svetofor, which is the seventh largest food retailer in Russia, and had a 1.4% share as of 2020. The chain had 2,465 stores (1.8mn sqm) as of 30 August 2021. Otherwise, the segment is unconsolidated and X5 is making what we view as a logical attempt to enter into a niche with prospects, while core competitor Magnit has 76 My Price stores, with 300sqm of selling space and 1,800 SKUs.
Chizhik was introduced by X5 Group in October 2020. It features 250-280sqm of selling space, 800 SKUs and targeted a private label share of 60% in the offering by 2023 (30%y YE21). Factoring the announced pace of openings, the target creates 3% upside risks to our 2021-25F revenues and we think will allow X5 to keep top line growth at 10% annually in the medium term.
X5 has scheduled a CMD on 27 October and we anticipate more details on the development of various formats, as well as on the company’s short-term capital allocation strategy.
9.2.6 Agriculture corporate news
132 RUSSIA Country Report October 2021 www.intellinews.com
Russian integrated agricultural major Rusagro held a capital markets day (CMD), setting ambitious targets for both organic and inorganic medium-term business growth, Sberbank CIB analysts write on September