Earnings Report /
Russia

X5 Retail Group: 4Q21 IFRS results

  • X5 reported its 4Q21 financials, which came in line with our expectations both on revenue and EBITDA

  • 2021 FCF came positive at RUB73.4bn, with net debt / EBITDA ending 2021 at 1.7x

  • The Supervisory Board recommended that X5 does not pay a final dividend for 2021

Evgeniy Kipnis
Evgeniy Kipnis

Senior Banking/Consumer Analyst

Olesya Vorobyeva
Olesya Vorobyeva

Analyst, TMT, Agro and Retail

Alfa
17 March 2022
Published by

X5 (FIVE LI / FIVE RX: U/R) reported its 4Q21 financials, which came in line with our expectations both on revenue and EBITDA. The 2021 EBITDA margin of 7.3% came in line with recent guidance and the company’s strategic commitment to maintain >7% EBITDA margin. The company decided not to distribute the final 2021 dividend amid the current market condition. Looking into 2022, the demand side looks secured for food retailers, and the ongoing stockpiling is likely to support X5’s and Magnit’s LfL sales growth in 1Q22F in the way it did in 1Q20. Going forward, the food retailers’ key focus likely to be on securing on-shelf product availability (we note imported products are c.20-25% of revenues, nearly half of which is relatively secured direct import) and cost control, supporting the price leadership in high inflationary environment. That said, in the near-term we would expect food retailers to minimize organic expansion and stores renovations. Longer-term, we see the opportunity for largest food retailers (X5 and Magnit) to accelerate market share build-up and improve the profitability of online sales channel amid potentially easing competition. The return to the practice of paying dividends (or making share buybacks) will likely take place once the operating environment stabilizes, we think.

· 4Q21 revenue came at RUB607.5bn, 15% higher y/y, in line with recently reported trading update and our expectations. As a result, 2021 sales grew 11% y/y to RUB2,204.5bn.

· 4Q21 EBITDA came 23% higher y/y at RUB40.1bn, in line with our estimates. EBITDA margin (under IAS17) came 0.4bp higher y/y at 6.6% and translated into 7.3% EBITDA margin in 2021, flat y/y. Margin improvement in Q4 was driven by 0.4pp y/y gross margin improvement (apparently due to reduced shrinkage and picked-up in commercial margin already seen in Q3), while SG&A expenses (excl. D&A&I, LTI, share-based payments and the impact of the Karusel transformation) were flat y/y as percentage of sales. 2021 EBITDA rose 11% y/y to RUB161bn, implying 7.3% margin (flat y/y).

· 4Q21 net income came at RUB9.6bn, 244% higher y/y, but 9% below our estimates – mainly reflecting high effective tax rate (35.6% in Q4). 2021 net income came at RUB48.5bn, 24% higher y/y.

· 2021 FCF came positive at RUB73.4bn, with net debt / EBITDA ending 2021 at 1.7x.

· The Supervisory Board recommended that X5 does not pay a final dividend for 2021 amid the current difficult market conditions and the need to allocate all resources towards supporting X5’s ongoing operations.

Figure 1. X5 4Q21 financials

Source: company data, Alfa-Bank