vk.com/id446425943

Russia

Equities

Dmitry Glushakov, CFA, Equities Analyst +7 495 663 47 96 // dmitry.glushakov@vtbcapital.com

Boris Sinitsyn, Equities Analyst +7 495 663 46 70 // boris.sinitsyn@vtbcapital.com

Nikanor Khalin, Equities Analyst +7 495 660 42 45 // nikanor.khalin@vtbcapital.com

Earnings Watch

Metals & Mining

Figure 8: 1W post-results performance relative to RTS since earnings release vs. EBITDA surprise

Source: Bloomberg, Interfax, Company data, VTB Capital Research * VTB capital forecasts

NLMK (+0.6% vs. RTS) scored noteworthy beats on EBITDA and net income, which were +12% and +24%, respectively, ahead of the consensus, thanks to the better performance of the Russian flat and the foreign rolling divisions. Despite that, FCFE was in line as still no working capital recovery.

Severstal (-1.6%) EBITDA matched our and consensus estimates, while net income came -7% below our forecasts. At the same time, the company again posted capex lower than we expected, resulting in stronger FCFE, of USD 481mn.

MMK (-4.5%) EBITDA and net income came 4-5% above market expectations on lower steel SG&A and lower costs at the coking coal division. The company positively surprised on dividends, announcing a total of USD 360mn for 3Q18, which represents a payout of 106% of FCFE. However, the stock fell behind the market as the company raised its 2018 capex guidance, and the outlook for 4Q18 is a seasonal downturn in volumes.

Alrosa (+2.7%) beat Street expectations on the top-line and EBITDA – both by +3% – thanks to better cost performance. However, the bottom-line came -5% below expectations. FCFE was higher than forecasted as insurance premia included. Net Debt/EBITDA ticked up to 0.2x, but still significantly low.

Polyus (+4.3%) EBITDA was in line with consensus, while net income beat expectations by +5%. The stock outperformed the broader market on the back of positives from the Natalka mine and capex, which might be below the guidance.

vk.com/id446425943

Russia

Equities

Elena Sakhnova, Equities Analyst +7 495 287 68 77 // elena.sakhnova@vtbcapital.com

Alexander Prutkin, Equities Analyst +7 495 663 46 58 // alexander.prutkin@vtbcapital.com

Ivan Postevoy, Equities Analyst +7 495 287 68 46 // ivan.postevoy@vtbcapital.com

Earnings Watch

Transportation & Fertilizers

Figure 9: 1W post-results performance relative to RTS since earnings release vs. EBITDA surprise

Source: Bloomberg, Interfax, Company data, VTB Capital Research * VTB capital forecasts

Aeroflot (-9.8% vs RTS) again beat the consensus on EBITDA and net income (+8% and +15% above, respectively). Despite the +47% YoY rise in fuel prices and 12% weaker rouble, the company managed to keep the EBITDAR margin at 32% (the same level as last year)

Acron (-4.1%) numbers came broadly in line with our forecasts. EBITDA up +41% YoY, with key driving factors were nitrogen prices and rouble depreciation.

Phosagro (+4.3%) offered one of the strongest sets of quarterly results since its IPO. The company beat consensus on EBITDA and net income by +9% and +6%, respectively. In addition, Phosagro announced the first increase in dividend payout in three years. As a result, the stock outperformed the benchmark by +4.3%.

vk.com/id446425943

Russia

Equities

Maria Kolbina, Equities Analyst +7 495 663 46 48 // maria.kolbina@vtbcapital.com

Nikolay Kovalev, Equities Analyst +7 495 287 68 65 // nikolay.kovalev@vtbcapital.com

Alexander Gnusarev, Equities Analyst +7 495 660 67 99 // Alexander.Gnusarev@vtbcapital.com

Earnings Watch

Consumer & Real Estate

Figure 10: 1W post-results performance relative to RTS since earnings release vs. EBITDA surprise

10%

Source: Bloomberg, Interfax, Company data, VTB Capital Research * VTB capital forecasts

X5 Retail Group (+8.2% vs RTS) posted robust financial results featuring EBITDA and net income +3% and +4% ahead of consensus. The EBITDA margin improved +37bp YoY as the increasing share of SG&A costs was offset by the gross margin build-up. Net debt/EBITDA went below 2x as of September. In a noteworthy move, the stock jumped as the reported profitability strengthens management’s target of the annual EBITDA margin being north of 7%.

Magnit (-5.4%) missed the consensus on EBITDA and net income by -5% and -15%, respectively.

Detsky Mir (-0.6%). On back of sales growth accelerating to +16% YoY, from +14% YoY in 1H18, the EBITDA margin improved +140bp YoY to 12.3%. The company has also met its previous guidance on EBITDA growth for 9mo18, which reached +34% YoY.

Rusagro (+0.9%) beat the Street expectations on revenue by +4%, but it missed consensus on EBITDA and net income by -3% and -28%, respectively. In the meantime, consolidated EBITDA of RUB 4.4bn surged +42% YoY

vk.com/id446425943

Russia

Equities

Vladimir Bespalov, Equities Analyst +7 495 663 46 51 // vladimir.bespalov@vtbcapital.com

Anna Kazaryan, Equities Analyst +7 495 663 46 87 // anna.kazaryan@vtbcapital.com

Earnings Watch

Media and IT

Figure 11: 1W post-results performance relative to RTS since earnings release vs. EBITDA surprise

15%

Source: Bloomberg, Interfax, Company data, VTB Capital Research * VTB capital forecasts

Yandex (+5.7% vs. RTS) financial results came well above consensus, with top line, EBITDA and net income being +6%, +18% and +19% higher, respectively. We believe that the main reason for this acceleration was the higher growth rate of Search and Portal revenues and the expansion of the taxi service. The EBITDA margin improved to 33%. The stock outperformed on that and company’s guidance upgrade.

Mail.ru Group (+1.5%) EBITDA and net income came significantly below consensus, -12% and -13% lower, respectively. The EBITDA margin was 24.6% in 3Q18, and while that was above the 21.4% in 2Q18, we believe that this largely reflected the effect of Pandao being excluded. Nevertheless, the company has raised its EBITDA guidance for FY18, which we largely attribute to the exclusion of Pandao, its lossmaking e-commerce business.

Qiwi (+9.5%) offered a significant positive surprise, beating consensus on revenue, EBITDA and net income by +10%, +13% and +19%, respectively. Qiwi’s adjusted net revenue increased 62% YoY. Despite pressure from continuing investments into SOVEST and Rocketbank, as well as the consolidation of loss-making Tochka, adjusted EBITDA dynamics improved in 3Q18 from previous quarters due to the growth of the high margin Payment Services and a better performance from Tochka.

Luxoft (-16%) beat the Street forecasts on EBITDA and net income by +16% and +19%. As a result, the company’s profitability came above expectations and management’s guidance. However, Luxoft’s inability to reignite growth – implied by its guidance for 3Q19 (ending 31 December) and the overall outlook for 2H19 (ending 31 March 2019) – put negative pressure on the stock. In addition, the company is faced with the selloff in global tech names, and, as a result, the stock has significantly underperformed (-16%) the broader market since its financial release.

EPAM (+4.8%) posted EBITDA and net income above market expectations (+5% and +10%, respectively). Top line rose +24% YoY, broadly in line with the Street forecast. As a result, the profitability of 19% positively surprised. In addition, the company increased its guidance for FY18, with the key changes mostly related to better profitability. The stock jumped, outperforming the broader market by +4.8% WoW since 3Q18 results.