LSR Group - 2021 Trading Update Above Conservative Guidance

LSR Group posted its 4Q21 and full-year 2021 trading update. Though the company missed our expectations, it exceeded its guidance. Overall, the numbers reflect the same trends we saw in the 4Q21 trading updates from other listed homebuilders - namely, strong seasonal Q-o-Q sales growth accompanied by higher selling prices, which indicates that demand for real estate remains strong despite elevated mortgage rates. > Full-year sales ahead of guidance... In 2021, new sales dropped 26% y-o-y to 613k m2 while rising a modest 1% y-o-y to R96.4 bln in monetary terms (PIK Group and Etalon Group's new sales were up 32% and 6%, respectively). The numbers still came in ahead of the company's guidance of 608k m2 and R91 bln by 1% and 5%, respectively, though these estimates were conservative, in our view. > ... but below our forecasts. We had expected a bit more, and the results missed our expectations (638k m2 and R98.7 bln in 2021) by 4% and 2%, respectively. The misses were mostly due to lower than expected sales in Moscow, where the company is facing a lack of projects available for sale, in our view. In 2022, LSR plans to significantly boost its supply in Moscow, however, by launching the new mass-market Ilmensky (NSA of 239k m2), business-class Krasny Mayak (NSA of 119k m2) and elite Soymonovsky projects.> Seasonally strong sales in 4Q21. Like PIK Group and Etalon Group, the company showed solid Q-o-Q growth in sales in 4Q21. They were up 42% and 46% in m2 and monetary terms, respectively (PIK's new sales were up 39% and 48% and Etalon's 34% and 35%, respectively, in the quarter). Year-over-year, LSR sales dropped 25% in m2 terms but grew 3% in monetary terms. The y-o-y dynamics improved compared to the very weak 3Q21 (down 49% y-o-y and down 32%). > Average selling prices continue to rise in 4Q21. They were up 3% Q-o-Q (up 38% y-o-y) across the whole portfolio, which was due to LFL price growth and the project mix. Average selling prices grew the most in Moscow (up 18% Q-o-Q, thanks to an increased share of the pricier Zilart), followed by Ekaterinburg (up 9%) and St Petersburg (down 4%). > Outlook for 2022. The company plans to provide its 2022 outlook at the analyst day scheduled for late February-early March, as well as give more details on its plans for the new hotel segment. The expansion into this segment remains unclear to us.