Page 146 - RusRPTNov21

Compared to 3Q19, the company’s top line was down 25.5%, while net income was down 86.5% to RUB2.9bn vs. net income of RUB21.4bn in 3Q19.
The price of Russian jet fuel reached a new historical peak of RUB57k/t, above the RUB56k/t high set in 2018 on October 14. However, this time is different as airlines are compensated with the fuel damper. We remind investors that the formula for the damper return is R = max[65% x (Pexp – Pfix), 0], where Pexp is the monthly average export fuel price from Russia and Pfix is RUB53,250/t for 2021 (note that the export price is higher than the aforementioned purchase price in Russia). 35% of excess is not compensated. At spot, Aeroflot’s effective price (with damper) will be RUB50k/t, +11% to RUB45k/t 2019 average. While growing fuel prices put pressure on the industry amidst closed borders, the impact on Aeroflot is likely to be lower than on global peers: i) it is backed by the fully recovered domestic market; and ii) there is a surge in demand for the few international destinations that have opened, and its yields are above the pre-COVID levels (were +14% in 2Q21). We also note that Aeroflot’s stock has traded in the RUB67-71 range for the last five months, barely reacting to any news. In our view, this pattern will continue until borders with Europe start to reopen. This could happen after the approval of Russia's Sputnik V vaccine (unlikely to happen in the following month). Our 12-mo TP is unchanged, RUB90 (ETR +29%), Buy, and is based on borders reopening and traffic recovery on the 12-month horison. However, we note that in the short term, the newsflow is not supportive.
9.2.4 Construction & Real estate corporate news
Etalon Group has acquired a 26 ha land plot near the city of Novosibirsk on which it plans to build a mass-market residential complex with an estimated net saleable area (NSA) of 280k m2, including 260k m2 of residential space. It expects to receive permits for the first stage of the project and launch sales in 2H22.
The project should be completed by the end of 2026. The new project is in line with the company's long-term strategy centered on regional expansion, geographical diversification and project portfolio replenishment. This is Etalon Group's second project outside the Moscow and St Petersburg metropolitan areas.
The first is in Omsk, which is close to Novosibirsk Region. The new land plot is located 25 km from Novosibirsk and is a 25-minute drive from Akademgorodok (one of the most important scientific and educational centers in Russia). Novosibirsk is the third largest city in Russia with around 1.5mn inhabitants.
The project is equivalent to around 10% of Etalon's unsold NSA as of end-2020 and is the largest addition to the company's project portfolio this year. According to the company's investor relations team, the project's gross margin should be 33-35%, which is comparable to projects in Moscow.
146 RUSSIA Country Report November 2021 www.intellinews.com