Equity Analysis /
Russia

Yandex (O/W), Mail.Ru (O/W) Re-initiation of coverage: All to play for in high return digitalization game

    Olesya Vorobyeva
    Olesya Vorobyeva

    Analyst, TMT, Agro and Retail

    Anna Kurbatova
    Anna Kurbatova

    Senior Analyst, TMT & Agro

    Alfa
    25 September 2019
    Published by
    We re-initiate coverage of Russian Internet with a positive view on the sector and expectation of 29-45% returns for investors. The digital transformation is ongoing in various Russian consumer markets and providing online companies with strong growth. We anticipate improvements to the profitability of Yandex and Mail.ru in 2020-21 as earlier investments grow in scale and start to pay off.  Mail.ru (O/W, $31.9 TP) is our top choice, as all negatives are already priced-in and operationally strong 4Q19 should refocus market interest in the name. We expect benefits from cooperation with AliExpress and Sberbank to become visible to investors by the end of this year and to gain scale in 2020.  Yandex (O/W, $48.3 TP) is fundamentally very attractive with 29% upside, but we do not expect the stock to challenge its historical highs while risks persist around the company’s ownership structure and until there is an update on the Yandex.Taxi IPO front.