Magnit retail network released its operating results on Monday for 7M 2008. We are neutral on the results. In July, the company's revenue grew by 52.2% y-o-y. Magnit has maintained the number of new openings at 25-30 stores per month and, by late July, had brought the total number of its retail outlets to 2,347.
Table. Magnit: Key Financials 7M 2008, USD million
| | 7M2007 | 7M2008 | 7M2008/7M2007 |
|---|
| Revenue, USD mn | 1,928.1 | 2,934.4 | 52.2% |
| Total number of stores | 2,029 | 2,347 | |
| Number of store openings | 150 | 136 | |
| Total selling space, thousand sq.m | 578.7 | 728.7 | 25.9% |
Source: company data, Finam estimates
We are generally neutral on the retail chain's operating results and do not expect them to produce any significant impact on the company's stock valuations. However, a quick growth in the company's sales, optimization of its logistic system and quite a powerful reinforcement of the company's positions in the hypermarket sector may boost Magnit's margins for 1H 2008.
Nonetheless, we believe that the possible risks of the government tightening regulation of the industry may exert certain psychological pressures on the investment demand for consumer retailer shares in the short term, despite their strong investment attractiveness as compared to peers from developed and developing countries.
In line with our estimates, the fair value of Magnit is USD 58.6 per share, a 35% upside on the current market valuation.
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