X5 Retail Group - Vive le ROI!
X5 Retail Group's EV/EBITDA has recovered to the two-year average, which has been a signal to take profits in the past. However, we now see even higher multiples as justified, as the company benefits from a more favorable market environment. We lift our medium-term EBITDA margin projection from 7.0% to 7.4% (the highest out there). We now assume incremental ROI of 20% over 2020-21; the difference between our estimate and the consensus of 14% may imply upside of 1.2 to EV/EBITDA. While the market is concerned about the R90 bln capex program for 2019, we think it is possible that either capex will be downgraded or EBITDA will come in higher than projected. We raise our target price to $37.00 per GDR and reiterate our BUY recommendation.
X5 Retail Group is a holding company. The main activity of Co. is the development and operation of grocery retail stores. Co. operates a retail chain of soft-discount, supermarket and hypermarket stores under the brand names "Pyaterochka", "Perekrestok" and "Karusel" in major population centres in Russia, including but not limited to Moscow, St. Petersburg, Nizhniy Novgorod, Rostov-on-Don, Kazan, Samara, Lipetsk, Chelyabinsk, Perm, Ekaterinburg and Kiev, Ukraine.
Sberbank CIB Investment Research is a research firm offering equity, fixed income, economics, and strategy research. It covers analysis on all aspects of Russia’s capital markets, issues and industries. The firm analyzes trends in Russia and combines local knowledge with a global perspective. It processes macroeconomic data, market and company-specific news, stock quotes and other information for providing research reports. The firm provides details and latest prices on the most traded names and most traded paper on all segments Russian market. In strategy research, it provides thematic research, tips and descriptions of the methodology used to evaluate companies.
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