Page 146 - RusRPTDec21

9.2.5 Retail corporate news
● X5 Group
X5 Retail Group has reported strong 3Q21 IFRS numbers. The gross margin added 50bp q/q and 70bp y/y to 25.8%, which is the highest quarterly level since 2008.
Still, the growth of SG&A expenses was slightly ahead, at +85bp y/y, to 18.8% of revenue. This resulted in an EBITDA margin of 7.7% (-26bp y/y), a robust result that matched our and the consensus estimates, also taking into account the high base effect of the previous year. 9mo21 revenue increased 10% y/y, with a 7.6% EBITDA margin, which matches the annual guidance of X5. It stands for the same top-line pace and at least a 7.3% EBITDA margin for 2021F. The latter creates moderate upside risks to our model (7.0% in 2021F). The company also confirmed its plans for 3k discounters over the next three years, which is likely to allow it to keep at least 10% revenue CAGR in the medium-term and secure leadership on the food retail market.
X5’s GDRs are up 12% over the last three months vs. the 35% surge for Magnit, an underperformance we view as unfounded, while the 2022F EV/EBITDA of 5.8x and 12-mo dividend yield of 8% are appealing to us.
3Q21 IFRS. The company had previously released its 3Q21 trading results, with revenue growth of 11.7% y/y, amid a high comparison base. The gross margin showed robust trends: it stood at 25.8%, up 50bp q/q and 70bp y/y, due to the enhanced commercial margin, supported by the product mix, lower promo levels and an improved shrinkage level. Still, SG&A costs grew faster than gross profit, adding 85bp y/y to 18.8% of revenue on the back of higher staff costs, third-party services and expenses related to the development of the digital business. Thus, the EBITDA margin reached 7.7%, generally in line with us and the consensus. Net income was up 14% y/y at RUB13.6bn and 4-7% ahead of the Street and our estimates, with a comparable y/y net margin (2.5%).
On Friday 19 November, X5 Retail Group announced the launch of X5 Bank in a joint venture with Alfa Bank. The first stage involves digital cards that combine the functionality of the Pyaterochka and Perekrestok loyalty cards with banking services such as payments, money transfers and RUB-denominated cash back. X5 Card users will be able to receive cashback of up to 2% on purchases as well as up to 8% annual interest on their balance.
X5 Retail Group stated its 2022 guidance, which assumes more than 10% y/y revenue growth, gross store openings at 1,700-2,000, profitability at the 2020-21 level and dividend payments of no less than 2021 (at least 8% yield).
146 RUSSIA Country Report December 2021 www.intellinews.com