Page 145 - RusRPTDec21

bottom line vs. our forecast as mainly due to Aeroflot Group’s higher-than-expected finance income, which was up 3x y/y to RUB3.1bn in 3Q21. The growth in finance income follows the 1.6x y/y growth in interest income to RUB1.7bn and the FX gain of RUB1.3bn. We did not estimate an FX gain, and our assumption for interest income was RUB1bn.
9.2.4 Construction & Real estate corporate news
LSR Group has released mixed 3Q21 operating results, with volumes down 50% y/y (to 124k sqm), while prices added 35% y/y. As a result, RUBsales were down 30% y/y to RUB20bn. For 9mo21, LSR's volumes reached 437k sqm, accounting for 72% of the annual guidance. St Petersburg was the LSR geography that suffered most (volumes down 60% y/y in 3Q21) followed by Moscow (-40% y/y) and Yekaterinburg (-17% y/y). The key reasons are the general sector cooling after the modification to the subsidised mortgages programme, the reduced market offer of LSR (as the total portfolio is drying out) and low new project launches. LSR has shown one of the weakest performances amongst listed developers, with a 10% YTD decline in shares. In our view, the company needs to enlarge its current portfolio in order to create a basis for sales to rebound, while the general macro environment is becoming less favourable for the residential sector, as the subsidised programme was downsized and interest rates are rising.
In 3Q21, volumes declined 50% y/y to 124,000sqm (+15% y/y in 2Q21), while prices were up 35% y/y, to RUB160k/sqm (+63% y/y in 2Q21).
Among the prime reasons for the slowdown, we flag the reduced market offer and cooling demand for LSR's projects after the subsidised mortgage programme was modified from 1 July, while the company’s overall portfolio is diminishing, with a need for new land acquisitions.
The prices over volumes trends were visible across all geographies, with volumes contracting 17-60% y/y and prices surging 17-52% y/y Moscow effectively has sales in two projects, Zilart and Luchi (85% in 3Q21 volumes) and could materially improve its performance upon faster sales launches in new potential projects.
Residential volumes stood at 437k sqm, with RUB67.5bn of residential sales in 9mo21, equal to 72% and 74% of the annual guidance, respectively.
LSR’s shares have lost 10% YTD, which is one of the weakest performances among listed developers in Russia. We remain cautious on the name, in light of the uncertainties over its medium-term rebound in sales, as the sector fundamentals are deteriorating after the subsidised mortgage programme was modified and interest rates raised.
145 RUSSIA Country Report December 2021 www.intellinews.com