- •Revisiting our analysis on “Russian food retail race for space”
- •X5: From growth to value and dividends; reiterate Buy
- •Magnit: We see a bumpy road for operational turnaround, remain Neutral
- •Lenta: Operational performance to remain challenged, Neutral
- •Valuation, price target and estimate changes
- •Financials
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Russia Retail
Macro challenges to continue into 2019, re-rating to depend on self-help measures; X5 remains our top pick
Revisiting “Russian food retail race for space“. Russian food retailers’ weak operational performance and Magnit’s comments at its CMD appear to have deepened investor concerns over the pace of expansion and intensifying competition in the sector. Our updated Russian food retail model suggests there is potential for modern retail space to increase by c.30% in the long term, driven by the largest players that still have market share below the 25% threshold in most regions. We reiterate our view that X5 and Magnit should be able to maintain their returns in FY19-20 while expanding at the current pace of 1.5-1.8k stores pa, given:
(1) material consolidation potential (at least half of X5 and Magnit’s openings are replacements of weaker retailers); and (2) composite incentive programmes, which we believe will keep the race for space rational. Post 2020, we expect both companies to slow down openings more actively.
2019 outlook. We expect consumer spending to remain subdued next year, implying that high levels of promotional activity are likely to persist. A recovery in food inflation (our economists forecast food CPI to accelerate to 4.3% in 2019 from 1.5% in 2018) is the only positive macro trend we observe, although we note that retailers’ shelf inflation will likely remain below the official rate owing to price investments. Overall, we believe that self-help measures will provide more support to share price performance in 2019 than a macro boost.
X5 remains our top pick. X5 remains the only Buy-rated stock in our Russian food retail coverage, as we expect ongoing margin pressure in capitals to be largely offset by higher margins in other regions and an improvement in shrinkages in 2019, and see upside risks to market expectations on dividends. Despite Magnit’s underperformance, we stay Neutral, as we now expect a recovery in LFL growth to be delayed to 2H19 and see further margin deterioration in 2019; we also note there could be downside risks to margins from the announced SIA Group acquisition. We remain Neutral on Lenta, despite its planned share buybacks and intention to slow down openings, as we expect operational performance to remain challenged in the short term and are mindful of the structural challenges for ‘big box’ stores in the long term. We revise our estimates and price targets reflecting recent results and macro assumptions.
Yulia Gerasimova
+7(495)645-4297 | yulia.gerasimova@gs.com OOO Goldman Sachs Bank
Maxim Nekrasov
+7(495)645-4013 | maxim.nekrasov@gs.com OOO Goldman Sachs Bank
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
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Goldman Sachs
Table of Contents
Russia Retail
Revisiting our analysis on “Russian food retail race for space” |
3 |
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|
Macro still tough; expect support only from rising food inflation in 2019 |
10 |
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|
X5: From growth to value and dividends; reiterate Buy |
11 |
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Magnit: We see a bumpy road for operational turnaround, remain Neutral |
17 |
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Lenta: Operational performance to remain challenged, Neutral |
22 |
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|
Valuation, price target and estimate changes |
25 |
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Financials |
28 |
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Disclosure Appendix |
31 |
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|
28 November 2018 |
2 |
vk.com/id446425943
Goldman Sachs
Russia Retail
Revisiting our analysis on “Russian food retail race for space”
In the “Race for space” report published last year, we discussed several themes which are now the subject of increased investor focus, including aggressive store expansion by the largest retailers (especially post Magnit’s Capital Markets Day), intensifying competition and the resulting impact on retailers’ operational performance and margins. In this note, we update our Russian food retail model, which still suggests sizeable growth potential for modern food retailers and the largest players in particular (X5 and Magnit still have market shares materially below the 25% threshold in most of the regions). We reiterate our view that X5 and Magnit should be able to continue expanding at the current pace (up to 2k openings pa) without sacrificing returns, given: (1) material consolidation potential (at least half of X5 and Magnit’s openings are replacements of weaker competitors rather than additions of completely new modern space); and (2) composite shortand long-term incentive programmes of market leaders, which we believe will keep the race for space rational. As highlighted in our deep-dive sector report, we continue to believe that leading players will slow down openings more actively after 2020 owing to market maturity and a growing overlap.
We still see potential for modern retail space growth in Russia
Based on our updated regional capacity analysis (more details on methodology in our November 2017 note), we see potential for modern food retail selling space to increase by c.30%, or by c.10 mn sqm in absolute terms, in the long term vs. 2018 levels. According to our Russian food retail model, c.80% of this space will be added in 2018-23, with a 4% forecast CAGR for modern food retail selling space over the next five years. We believe the rise of the largest food retail chains will be at the expense of both traditional retailers (we forecast selling space to decline at a pace of 4% pa) and small regional players (we forecast growth for modern retailers outside of top-8 to remain flat over the next five years). We estimate that modern food retail selling space per ‘000 people will increase to 322 sqm by 2023 (+30% vs. the 2017 level), broadly in line with the current Polish level (c.320 sqm in 2017).
Exhibit 1: We see potential for Russian modern food retail space to |
Exhibit 2: We expect the top two players to account for almost |
increase by c.30%, or by c.10 mn sqm |
three quarters of the new modern space by 2023 |
Modern food retail selling space potential, mn sqm |
Selling space addition by key players in 2019-23, mn sqm |
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15.0 |
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|
15% of LT |
|
13.0 |
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potential |
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10.5 |
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||
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11.0 |
|
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|
80% of LT |
|
10.5 |
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8.3 |
||
potential |
|
|
9.0 |
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|
7.0 |
|
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|
38.5 |
|
|
5.0 |
2.6 |
72% |
57% |
|
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3.0 |
|
6.0 |
|
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|
1.0 |
3.3 |
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|
-1.0 |
X5 |
Magnit |
Top-2 |
New modern |
Total potential |
2018E Modern space |
2018-23E Roll-out |
2022-27E Roll-out |
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||||||
LT potential for new |
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space in 2019- |
space addition |
||||
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modern space |
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23E |
|
Source: Goldman Sachs Global Investment Research, Infoline Source: Company data, Infoline, Goldman Sachs Global Investment Research
28 November 2018 |
3 |
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Goldman Sachs
Russia Retail
Exhibit 3: Our base case suggests Russia will increase its selling space per capita level by c.30% by 2023
Food retail selling space, 2014-23E
|
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|
|
CAGR |
|
|
|
Selling space, th sqm |
2014 |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
2021E |
2022E |
2023E |
|
2008-13 2013-18 2018-23 |
|
||
|
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|
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|
Grocery retail |
46,325 |
47,283 |
48,833 |
51,012 |
52,982 |
54,955 |
56,391 |
57,479 |
58,300 |
58,853 |
6% |
4% |
2% |
|
|
|
yoy |
4.6% |
2.1% |
3.3% |
4.5% |
3.9% |
3.7% |
2.6% |
1.9% |
1.4% |
0.9% |
|
|
|
|
|
|
Modern retail |
28,180 |
30,277 |
32,786 |
35,899 |
38,474 |
40,954 |
42,880 |
44,509 |
45,848 |
46,775 |
16% |
9% |
4% |
|
|
|
yoy |
13.2% |
7.4% |
8.3% |
9.5% |
7.2% |
6.4% |
4.7% |
3.8% |
3.0% |
2.0% |
|
|
|
|
|
|
Top-8 |
9,605 |
11,543 |
13,474 |
15,502 |
17,261 |
18,999 |
20,815 |
22,444 |
23,893 |
25,039 |
22% |
16% |
8% |
|
|
|
yoy |
17.1% |
20.2% |
16.7% |
15.0% |
11.3% |
10.1% |
9.6% |
7.8% |
6.5% |
4.8% |
|
|
|
|
|
|
Other modern retail |
18,575 |
18,734 |
19,312 |
20,397 |
21,213 |
21,955 |
22,065 |
22,065 |
21,955 |
21,735 |
14% |
5% |
0% |
|
|
|
yoy |
11% |
1% |
3% |
6% |
4% |
4% |
1% |
0% |
-1% |
-1% |
|
|
|
|
|
|
Traditional retail |
18,145 |
17,006 |
16,046 |
15,113 |
14,509 |
14,001 |
13,511 |
12,970 |
12,452 |
12,078 |
-1% |
-6% |
-4% |
|
|
|
yoy |
-6.5% |
-6.3% |
-5.6% |
-5.8% |
-4.0% |
-3.5% |
-3.5% |
-4.0% |
-4.0% |
-3.0% |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modern space per 000’ people |
196 |
210 |
227 |
249 |
266 |
283 |
296 |
307 |
316 |
322 |
16% |
9% |
4% |
|
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|
Source: Goldman Sachs Global Investment Research, Infoline, Company data
Exhibit 4: We forecast the modern food retail market to see a 7% CAGR in the next five years, gaining market share from traditional traders
Russian food retail model, Rub bn (ex VAT)
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|
CAGR |
|
Grocery retail market RUB bn |
2014 |
2015 |
2016 |
2017 |
2018E |
2019E |
2020E |
2021E |
2022E |
2023E |
|
2008-13 |
2013-18 |
2018-23 |
|
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|
GS FORECAST |
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|
Total food retail market |
10,766 |
11,674 |
11,958 |
12,553 |
13,040 |
13,746 |
14,404 |
15,106 |
15,719 |
16,196 |
11% |
6% |
4% |
|
Total modern retail |
6,641 |
7,523 |
8,192 |
8,815 |
9,414 |
10,172 |
10,942 |
11,732 |
12,445 |
13,052 |
16% |
10% |
7% |
|
Total traditional trade |
4,125 |
4,151 |
3,766 |
3,738 |
3,626 |
3,574 |
3,461 |
3,375 |
3,274 |
3,144 |
7% |
-2% |
-3% |
|
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|
pp change |
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|
|
|
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|
Modern retail penetration |
62% |
64% |
69% |
70% |
72% |
74% |
76% |
78% |
79% |
81% |
10% |
13% |
8% |
|
Proximity / Discounters stores |
31% |
34% |
36% |
38% |
40% |
42% |
44% |
46% |
47% |
48% |
1% |
14% |
8% |
|
Hypermarkets |
11% |
11% |
11% |
11% |
10% |
10% |
10% |
10% |
10% |
9% |
3% |
0% |
-1% |
|
Supermarkets |
18% |
18% |
18% |
18% |
18% |
18% |
19% |
19% |
19% |
19% |
6% |
-2% |
1% |
|
Other (minimarkets) |
2% |
2% |
3% |
3% |
3% |
3% |
3% |
3% |
4% |
4% |
0% |
1% |
0% |
|
Total traditional trade |
38% |
36% |
31% |
30% |
28% |
26% |
24% |
22% |
21% |
19% |
-10% |
-13% |
-8% |
Source: Goldman Sachs Global Investment Research, Infoline, Company data
Regional market share analysis suggests significant growth opportunities
Based on regional market shares, X5 and Magnit have room for growth in key regions before reaching the 25% individual market share cap. For X5, we see significant potential to expand in Moscow (primarily in the city of Moscow where its market share is 14% vs. 23% in the Moscow region), as well as North West (ex St. Petersburg), where X5 enjoys high brand recognition and operates at higher margins vs. other regions (up to 2x, per the company), while it continues to increase its store density in other regions.
28 November 2018 |
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For Magnit, we see significant potential for organic growth in most of the regions; we also believe expansion in the largest cities (particularly St Petersburg) might be M&A-driven owing to relatively high consolidation and modern retail penetration levels.
Exhibit 5: X5 and Magnit have room for growth in all regions (except St. Petersburg for X5) before hitting the 25% market share cap
Market share by value across federal districts, 1H18; total market shares as of 2018E
11.7% |
8.8% |
3.2% |
2.4% |
2.2% |
RussiaTotalTotal* |
|
|||
|
|
|
|
|
X5 |
Magnit |
Lenta |
Auchan |
Dixy |
17.4% |
11.4% |
|
|
|
Central (ex |
3.8% |
1.9% |
1.8% |
|
Central |
|
|||
Moscow city and |
|
|
|
|
X5 |
Magnit |
Krasnoe & Beloe |
Dixy |
Auchan |
12.4% |
10.8% |
5.8% |
3.5% |
2.8% |
NorthNorthWestWest(ex |
|
|||
St Pete) |
Magnit |
Dixy |
Lenta |
InterTorg |
X5 |
12.2% |
4.6% |
2.0% |
1.0% |
1.0% |
|
||||||
Southern |
|
|
|||||||||
Southern + NC |
|
|
|
|
|
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|
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|
|
|
Magnit |
|
X5 |
|
Lenta |
|
Auchan |
|
O’KEY |
|
12.9% |
11.4% |
4.4% |
2.3% |
1.6% |
Volga |
|
|||
Volga |
|
|
|
|
Magnit |
X5 |
Krasnoe & Beloe |
Lenta |
Auchan |
Urals |
8.5% |
6.7% |
6.3% |
5.3% |
3.1% |
Ural |
|
|
|
|
|
|
Magnit |
X5 |
Krasnoe & Beloe |
Monetka |
Lenta |
Siberia |
3.9% |
3.1% |
2.7% |
1.9% |
1.5% |
Siberia + FE |
|
|
|
|
|
|
Maria Ra |
Lenta |
Magnit |
Komandor |
Holiday Classic |
|
17.8% |
|
|
|
|
Moscow (city+ |
|
5.0% |
4.2% |
3.0% |
1.8% |
Moscow |
|
|
|
|
|
region) |
X5 |
Dixy |
Auchan |
Magnit |
Metro |
|
|||||
|
25.8% |
16.2% |
13.0% |
9.3% |
6.8% |
StStPetersburgtersburg |
|
||||
|
|
|
|||
|
|
|
|
|
|
|
X5 |
Lenta |
O’KEY |
InterTorg |
Dixy |
* as of 2018E, GIR estimate
Source: Infoline, Goldman Sachs Global Investment Research.
Exhibit 6: Although overall modern retail penetration in Russia still lags that in DM, the key regions are as saturated as certain DM countries
Modern retail penetration (value terms), %, 1H18
97%
82% |
80% |
|
|
Russia |
|
74% |
70% |
67% |
|
|
64% |
|||
|
|
49%
St |
North- |
Moscow + |
Central (ex Volga |
Ural |
Siberia and South |
Petersburg |
Western |
region |
Moscow) |
|
Far East |
|
(ex St Pete) |
|
|
|
|
Exhibit 7: We expect Magnit to focus on expansion in Moscow and Siberia (new regions), while X5 on Volga, South and Ural (regions with established presence)
Market shares in total food retail (revenues)
|
2018E |
|
|
2023E |
||
|
X5 |
Magnit |
X5 |
|
Magnit |
|
Central (ex Moscow) |
20% |
|
12% |
21% |
|
16% |
Volga |
13% |
|
12% |
19% |
|
15% |
North West (ex St Pete) |
14% |
|
12% |
19% |
|
15% |
South |
7% |
|
14% |
13% |
|
15% |
Ural |
10% |
|
9% |
15% |
|
13% |
Siberian |
2% |
|
5% |
10% |
|
12% |
North Caucasus |
2% |
|
5% |
3% |
|
6% |
Moscow |
15% |
|
4% |
19% |
|
9% |
St Petersburg |
25% |
|
5% |
25% |
|
9% |
Total |
12% |
|
9% |
16% |
12% |
Source: Infoline, Goldman Sachs Global Investment Research |
Source: Goldman Sachs Global Investment Research, Infoline |
28 November 2018 |
5 |
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In 2019-20, the current pace of expansion can be maintained without sacrificing
returns...
The combination of a weak consumer environment in Russia (with food retail sales in real terms barely growing this year and intense promotional activity) and intensifying competition (among the largest retail chains as well as with emerging disruptors such as specialised retailers) have raised investor concerns about the rationality of rapid space expansion by market leaders. These concerns appear to have deepened post Magnit’s CMD where the company presented its expansion plans for the next five years, implying 9.4k new convenience store openings (i.e. 1.8-1.9k new stores per annum during the next five years on an organic basis). In light of a maturing market we are cautious on such a pace of organic expansion over a five-year period. However, over the next two years, we believe it is possible for both X5 and Magnit to undertake organic openings up to 2k stores without sacrificing returns given material consolidation potential and their composite incentives programmes.
Consolidation potential. We expect market consolidation to be an important growth driver for the market leaders along with growing modern retail penetration. Around 50% of all new stores of X5 and Magnit have been opened in locations that were previously occupied by less-efficient modern retailers, i.e. these new stores are replacements and not additions of new space. We note that in most of the regions in European Russia (where, in contrast to Ural and Siberia, X5 and Magnit don’t need to invest much into brand recognition and supply chain/logistics, and are able to benefit from economies of scale), the market shares of the two leaders are still low, and we see solid consolidation potential here. We also expect to see a growing share of inorganic openings (now accounting for c.10%-15% of X5’s annual expansion, per the company, and negligible for Magnit), primarily given low valuations of small regional players (in most cases, large retailers buy lease rights rather than the business) and limited integration risks. In our view, this should help to mitigate most of the pressure from low consumer spending growth, as a higher share of the consumer wallet would be allocated to the market leaders.
Exhibit 8: Overall, we expect the top-three listed players to account for c.80% of new modern space additions in 2018-23, and over 100% afterwards…
Selling space addition, mn sqm
Listed-3 space increase Modern retail increase Share in new modern space
139%
16.0 |
76% |
14.0 |
56% |
13.6 |
|
|
|
100% |
|
|
|
|
|
|
|
12.0 |
|
|
|
|
|
0% |
10.0 |
7.6 |
|
8.3 |
|
|
-100% |
8.0 |
|
|
|
|
||
|
6.3 |
|
|
|
||
|
|
|
|
-200% |
||
6.0 |
|
|
|
|
||
|
|
|
|
|
-300% |
|
4.0 |
|
|
|
|
|
|
|
|
|
2.2 |
|
|
|
2.0 |
|
|
|
1.6 |
-400% |
|
|
|
|
|
|||
|
|
|
|
|
|
|
0.0 |
2013-18E |
2018-23E |
2023-27E |
-500% |
||
|
|
Exhibit 9: ...leading to significant market consolidation, in our view, primarily by the largest players
Market shares, 2018E/2023E (total food retail market)
2023E
|
|
24% 31% |
Top 3 |
|
2018E |
|
Top 4-7 |
|
8% |
Other |
|
|
|
||
|
69% |
|
|
61% |
|
|
|
|
|
7% |
|
Source: Infoline, Company data, Goldman Sachs Global Investment Research |
Source: Company data, Goldman Sachs Global Investment Research |
28 November 2018 |
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Management incentive programmes. Both X5 and Magnit use composite STI’s and LTI’s that include share price, growth, margin, return and market share elements. We believe the need to reconcile growth/share and either margins or returns on capital will incentivise management to strike a balance in delivering relatively ambitious roll-out targets and maintaining competitive margins/returns.
nMagnit. The company’s LTI programme (effective over 2019-23) is linked to EBITDA and market capitalisation growth, while achieving a certain market position is not among the KPIs. Moreover, management’s short-term incentive programme (up to 50% of annual compensation) includes an EBITDA margin trigger, implying that no bonus will be paid if the margin declines below a certain level (similar to X5’s management STI). Thus, we believe Magnit might be less inclined to pursue all the 9.4k planned proximity store openings (at least organically), given the implications such an expansion would have for EBITDA margin/returns.
nX5. X5’s long-term incentive programme (effective over 2018-20) has maintenance of market leadership among the KPIs. Based on management comments, we note that X5 calculates its market share excluding any potential M&A undertaken by competitors. We believe that this, in combination with other KPIs (such as keeping EBITDA margin close to current levels and ROIC sustainability included in STI, as well as sector-leading valuation multiple included in LTI), may lead to a rational approach in terms of expansion, sales density growth and margins/returns sustainability.
Exhibit 10: X5 and Magnit’s STI and LTI programmes
|
|
|
Magnit |
X5 |
|
|
|
Key triggers |
- Share price growth |
- Leading LTM EV/EBITDA multiple |
|
|
|
- EBITDA growth |
- #1 Mkt share in food retail |
|
|
|
|
|
|
||
|
|
Size |
up to Rub 16.5bn |
5% of average 2018-20 EBITDA (~Rub 6bn on GS estimates) |
|
|
LTI |
Duration |
5 years |
3 years |
|
|
|
|
|||
|
|
# of participants |
50 executives |
200 executives |
|
|
|
Payment |
Share-based (shares and options) |
Fully cash-based |
|
|
|
|
|
|
|
|
|
|
- Individual KPIs |
- Individual KPIs |
|
|
|
Key triggers |
- EBITDA margin above certain levels |
- EBITDA margin / ROIC sustainability |
|
|
STI |
|
- LFL / Revenue growth |
- Net Debt / EBITDA below 2x |
|
|
|
|
|
|
|
|
|
Size |
Up to 50% of annual compensation |
Up to 50% of annual compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Source: Company data, Goldman Sachs Global Investment Research
28 November 2018 |
7 |
vk.com/id446425943
Goldman Sachs
... but we expect retailers to slow down openings after 2020
Russia Retail
As highlighted in our deep-dive report last year, we see the leading players slowing down organic expansion more actively after 2020:
nMarket maturity: This is measured by modern retail penetration which we expect to approach DM levels of c.80% in 2021-22. As a result: (a) we see a lower number of quality locations; and (b) believe that more active/larger-scale M&A would be needed to maintain the same pace of expansion, while we would expect organic openings to slow down.
nGrowing overlap between the largest retailers: On our calculations, close to 70% of X5 and Magnit’s new stores in 9M18 were opened in the same catchment area; assuming this trend continues, we may reach over 80% overlap between these two market leaders by the end of 2020.
nManagement incentives. As we highlighted above, X5’s management is incentivised by the LTI programme to maintain market leadership without sacrificing margins (effective over 2018-20). Per the company, 2020 will be the year in which its market share will be measured, and, according to management comments at the CMD, the next LTI programme may not have market leadership as one of the KPIs given the growing focus on returns generation. We therefore believe there may be a more visible slowdown in openings at X5 starting from 2021, which in turn may lead to rationalisation of expansion by key competitors with reduced risk of losing market share/good locations to X5.
28 November 2018 |
8 |
vk.com/id446425943
Goldman Sachs
Russia Retail
Why is there such a high overlap between the leading players despite low market consolidation?
One of the frequent questions we receive from investors is: “Why is there such a high level of overlap between the leading players (on our estimates, c.65% of X5’s stores are in the same catchment area (within 500m) as those of Magnit), given still low market consolidation (top-5 have 28% market share as of 2018, on our estimates)?”. In our view, this is largely explained by the dispersion of population density in Russia and the dominance of proximity formats.
1.A few regions account for the majority of retail sales. Potential for growth is mainly concentrated within a few federal districts with the highest population and purchasing power, such as Central, Volga, North West and South (which comprise over 70% of the retail market). Thus, a retailer cannot become a large player without expanding into these key regions, leading to a high overlap between the leaders.
2.High concentration of population in large cities. Despite Russia’s low population density, the country is highly urbanised (74%); moreover, concentration of people living in large cities is significantly above that of Poland, and even higher than that of the UK (Exhibit 12). Also, we note that population density in residential areas inside Russian cities is quite high, as many people live in high-rise residential buildings (only 26% of the population live in individual houses, mostly in rural areas), implying retailers have to compete in same locations within cities.
3.Proximity formats operate in areas with high store density. Taking into account limited selling space per proximity store (usually <400 sqm) and the number of cashiers per store (usually up to five), to prevent large queues and optimise logistics, proximity stores generally operate in residential areas with high store density.
Taking these factors into account, we believe that a growing overlap is inevitable, and, considering the 25% market share cap in each region, we do not rule out the possibility of market leaders X5 and Magnit reaching 100% overlap within the next three-four years. At the same time, we believe a more consolidated market structure (with two-three leaders, which we expect to be the case in Russia over the medium to long term) allows for more rational competition vs. numerous players of similar size.
Exhibit 11: The top four regions account for over 70% of retail sales in Russia
Share of regions in retail sales, 2017
Exhibit 12: Russian population is highly concentrated in large cities and retailers have to compete in same residential areas within cities
Distribution of population by city size, 2017
40% |
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|
35% |
34% |
72% of retail |
|
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|
45% |
||
|
|
sales |
|
|
|
|
|
|||
30% |
|
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|
|
|
|
|
40% |
|
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|
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|
|
|
|
|
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||
25% |
|
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|
|
|
|
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|
35% |
|
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|
|
|
|
|
|
|
30% |
||
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|
|
|
|
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||
20% |
|
18% |
|
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|
25% |
|
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|
|
|
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|
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||
15% |
|
|
10% |
|
10% |
|
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|
20% |
|
10% |
|
|
10% |
9% |
|
|
15% |
|||
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|
|
5% |
|
||||
5% |
|
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|
4% |
10% |
||
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||||
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||
0% |
|
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|
|
|
|
|
|
5% |
|
Central |
Volga |
North |
South |
Siberia |
Ural |
North |
Far East |
0% |
||
|
||||||||||
|
|
|
West |
|
|
|
Caucasus |
|
|
Russia |
England & Wales |
Poland |
Over 1mn |
500k-1mn |
250-500k |
100-250k |
Towns <100k |
Rural areas |
Source: Rosstat |
Source: Rosstat, Statistics Poland, Office for National Statistics |
28 November 2018 |
9 |
vk.com/id446425943
Goldman Sachs
Russia Retail
Macro still tough; expect support only from rising food inflation in 2019
Exhibit 13: Consumer spending remains subdued as retail sales |
Exhibit 14: ...largely driven by food retail sales |
have decelerated since June in real terms... |
Food retail market growth, % |
Retail market growth, % |
|
|
|
|
|
% yoy (nom terms) |
|
% yoy (real terms) |
|
|
|
10.0% |
|
|
|
% yoy (real terms) |
|
|
% yoy (nom terms) |
|
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|
8.0% |
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5.9% |
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5.0% |
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|
3.5% |
3.0% |
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1.9% |
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||
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0.5% |
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0.0% |
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|
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|
-2.0% |
|
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|
|
|
|
|
|
|
|
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|
-5.0% |
|
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|
|
|
|
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|
-7.0% |
|
|
|
|
|
|
|
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|
-10.0% |
|
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|
|
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|
-12.0% |
|
|
Jul-16 |
Sep-16 Nov-16 Jan-17 Mar-17 May-17 |
Jul-17 |
Sep-17 Nov-17 Jan-18 Mar-18 |
|
Jul-18 |
|
-15.0% |
|
|
Jul-16 |
Sep-16 Nov-16 Jan-17 Mar-17 |
|
Jul-17 |
Sep-17 Nov-17 Jan-18 Mar-18 |
|
Jul-18 |
|
Jan-16 |
Mar-16 |
May-16 |
May-18 |
Sep-18 |
Jan-16 |
Mar-16 |
May-16 |
May-17 |
May-18 |
Sep-18 |
Source: Rosstat |
Source: Rosstat |
Exhibit 15: Real wages/incomes have decelerated from the 1Q18 peak, and we do not expect a significant improvement next year
Real wages and disposable income growth, yoy
15.0% |
Real disposable income, % yoy |
Real wages, % yoy |
|
||
10.0% |
|
|
5.0% |
|
4.4% |
|
|
|
0.0% |
|
1.4% |
|
|
|
-5.0% |
|
|
-10.0% |
|
|
-15.0%
Jan-16 |
Mar-16 |
May-16 |
Jul-16 |
Sep-16 |
Nov-16 |
Jan-17 |
Mar-17 |
May-17 |
Jul-17 |
Sep-17 |
Nov-17 |
Jan-18 |
Mar-18 |
May-18 |
Jul-18 |
Sep-18 |
Exhibit 16: Consumer confidence has dropped materially since June
Consumer confidence index
110 |
Consumer confidence index |
|
|
105 |
|
100
95
92
90
85
80
75
70
Jan-16 |
Mar-16 |
May-16 |
Jul-16 |
Sep-16 |
Nov-16 |
Jan-17 |
Mar-17 |
May-17 |
Jul-17 |
Sep-17 |
Nov-17 |
Jan-18 |
Mar-18 |
May-18 |
Jul-18 |
Sep-18 |
Source: Rosstat |
|
Source: CBR |
|
|
|
Exhibit 17: Our economists expect consumption to weaken further |
|
Exhibit 18: We expect further acceleration in food inflation to be |
into 1Q19 given the upcoming 2pp VAT hike in January |
|
the only factor supporting retail sales into 2019 |
Private consumption, % |
|
Food CPI, yoy |
5.0% |
|
|
|
|
|
|
|
|
|
|
Food |
Food ex F&V |
4.0% |
|
|
|
|
|
|
|
|
|
|
7.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0% |
|
|
|
|
|
|
|
|
|
|
6.0% |
|
|
|
|
|
|
|
|
|
|
|
5.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.0% |
|
|
|
|
|
|
|
|
|
|
4.0% |
|
1.0% |
|
|
|
|
|
|
|
|
|
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.0% |
|
|
|
|
|
|
|
|
|
|
2.0% |
|
|
|
|
|
|
|
|
|
|
|
1.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-1.0% |
|
|
|
|
|
|
|
|
|
|
0.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-2.0% |
|
|
|
|
|
|
|
|
|
|
-1.0% |
|
1Q |
2Q |
3Q |
4Q |
1Q |
2Q |
3Q |
4QE |
1Q |
2Q |
3Q |
4Q |
|
|
2017 |
|
|
2018 |
|
|
2019E |
|
|
Source: Goldman Sachs Global Investment Research, Rosstat |
Source: Rosstat, Goldman Sachs Global Investment Research |
28 November 2018 |
10 |