QIWI - Good 1Q20; Guidance Reiterated

QIWI's 1Q20 results were strong despite the impact of the lockdowns, which started to be felt in mid-March. The results beat the consensus on net revenues by 2.5% and adjusted net income by 4.7%. QIWI, unlike its peers, reiterated its previous guidance despite the ongoing volatility. We reiterate our BUY rating for QIWI and target price of $16.40 per share. The stock is trading at an attractive 2020E EV/EBITDA of 3.5 and P/E of 8.4 (and a respective 1.7 and 5.5 for 2021E).> Payment services net revenue growth was resilient in 1Q20 but might turn negative in 2Q20. QIWI's net revenues reached R6.3 bln in 1Q20, which meant an acceleration to 16.6% y-o-y growth, which was attributable to 10% growth in core payment revenues, to R5.3 bln. Payment revenue growth was down from the 15.8% pace of 4Q19 due to a slowdown in the e-commerce segment (which includes betting-related revenues) to 10% y-o-y in 1Q20 from 14% in 4Q19 and in money remittances to 11% from 29%. QIWI explained during the call that the effect of the lockdown measures was most prominent in betting-related revenues and for the self-employed segment (including in money remittances). This has triggered a decline in payment service revenues in April and so far in May and might cause a single-digit percent decline in payment services net revenues in 2Q20. Having said that, QIWI thinks 2Q20 might be the weakest quarter of the year. The payment services net margin shrank 4.5 pp y-o-y to 57.3% in 1Q20, partly due to elevated personnel expenses triggered by the cash based LTIP. > Macro headwinds might not allow consumer banking segment to break even in 2020. The net revenue yield for Sovest in 1Q20 rose to 6.4%, up from 4.3% in 1Q19, which helped net revenues to surge 160% y-o-y to R566 mln. Meanwhile, the segment's net loss was about flat y-o-y at R522 mln, while excluding a R186 mln provision the loss shrank 37% y-o-y to R336 mln. We think both net revenues and yields might come under pressure in 2Q20, as customers' shopping activity significantly declined due to the lockdown measures.> Rocketbank wind-down ongoing. Rocketbank broke even on the net revenue level for the first time in its history in 1Q20, thanks to increased tariffs, while its net loss totaled R660 mln versus the R1.5 bln loss guided for the year.> Dividend for 1Q20 implies 1.0% yield. The BoD has approved a dividend for 1Q20 of $0.14 per share with a record date of June 2. We expect a 5.7% yield for 2020, assuming a 50% payout based on our earnings estimate.> Guidance reiterated. The company expects adjusted net revenues to grow 3-13% this year (our forecast is 3.5%), with growth for the payments segment projected at negative 3% to positive 5% (-0.8%). QIWI also expects adjusted net income to expand 10-30% (14.7%).