Page 149 - RusRPTNov21

margin guidance is 10%, even though it posted an 11.3% margin in 1H21 and the second half of the year is usually stronger. According to our calculations, the announced revenue figure for 3Q21 suggests an EBITDA margin of 12% for the quarter, which is above the company's guidance and the consensus. Detsky Mir has demonstrated impressive resilience to the recent economic downturn and to competition from online players, and we think the strong 3Q21 results should reaffirm its strong investment case. Detsky Mir offers not just one of the highest revenue growth rates in the retail sector, but also an 11% dividend yield for 2022. Meanwhile, the company's strong RAS results for 1H21 (net income of R3.9bn versus R1.3bn in 1H20) and likely for 3Q21 as well should enable it to pay healthy dividends for 9m21, in our view. We reiterate our positive view on the stock. Mikhail
Detsky Mir reported 3Q21 Trading update. Sales growth remained strong at 14% y/y, driven by +6.3% y/y in LfL sales and +10.4% y/y in selling space. Apparel and footwear accounted for 36% of total sales in Russia (up 3% y/y) while stationery, books and multimedia stood at 7% of total sales (up 0.1% y/y). The share of private labels in apparel and footwear is 98%. Other best-selling categories included toys (25%) and products for newborns (28%).
The Group’s revenue was up to 14% y/y vs +13.5% in 3Q20 and +29.6% in 2Q21, driven by 10.4% y/y growth in selling space and a 6.3% increase in LfL sales in Russian, Kazakhstan and Belarus
o Online revenue was up 29% y/y with 27% share in total sales in Russia
o The share of private labels and direct contracts in total sales went up 4p.p. y/y to 53%
LfL sales in Russia, Kazakhstan and Belarus grew by 6.3% y/y (vs +3.9% in 3Q20) on higher traffic with LfL number of tickets up 4.1% y/y (vs -2.1% in 3Q20) and higher LfL average basket (+2.2% y/y vs +6%)
o LfL sales in Russia rose 5.9% y/y vs +7.5% in 1Q21 and +1.1% in 2Q20
Total number of stores reached 1,014 (+25% y/y) with overall selling space of 947,000 sqm (+10.4% y/y)
Marketplace’s contribution to DSKY’s GMV amounted to Rb919mn (vs Rb116mn in 3Q20) and represented 7% of total online sales in Russia (up from 5% in 2Q21)
Detsky Mir is the leading player on the Russian children’s goods market, with a 22% share (as of 2020), while Wildberries is the second largest operator. The latter’s sales of RUB74bn are behind Detsky Mir (RUB131bn in 9mo21), while the growth, at 54% y/y, is significantly stronger than Detsky Mir's 21% y/y. If Detsky Mir is unable to increase the pace of its growth, it might eventually be overtaken by Wildberries and lose its favourable purchasing power and operating scale advantages. In the online segment, which is dominated by Wildberries (45% share in 2020), Detsky had sales of RUB36bn (27% in total) in 9mo21, which increased 43% y/y (but was still below Wildberries). In order to mitigate this, Detsky Mir is developing its own marketplace (1mn SKU), which had RUB1bn of sales, or
149 RUSSIA Country Report November 2021 www.intellinews.com