Magnit retail network released Tuesday its strong financial results for 1H 2008. In the reporting period, the company's overall revenue grew by 50.8% in US dollar terms to USD 2.46 billion. The retail chain also showed robust sales performance thanks to an increase in the total number of stores and high LFL sales at about 29%.
Table. Magnit: Key Financials 1H 208, USD million
| | 1H2007 | 1H2008 | 1H2008/1H2007 |
|---|
| Revenue | 1,638.2 | 2,469.9 | 50.8% |
| Cost of production | 1,329.8 | 1,954.8 | 47.0% |
| Gross profit | 308.4 | 515.1 | 67.0% |
| Gross margin | 18.8% | 20.9% | |
| Operating expenses | 249.6 | 402.0 | 61.0% |
| EBITDA | 82.8 | 157.6 | 90.3% |
| EBITDA margin | 5.1% | 6.4% | |
| Net profit | 37.6 | 65.9 | 75.3% |
| Net margin | 2.3% | 2.7% | |
Source: company data, Finam estimates
We are upbeat on Magnit's 1H 08 financial results. Along with maintaining a high rate of new store openings, which has a positive impact on the company's sales, Magnit has managed to establish efficient control over expenses. As a result, Magnit considerably increased its operating margin in the reporting period.
In a phone conference, Magnit management voiced its plans to open 9 more hypermarkets by the end of the year, which should, in our view, have a positive impact on the company's revenue for FY 2008. The development of the company's logistics system, particularly, the opening of two new logistics centers by the end of the current year, should improve the retail chain's margins. In our opinion, the Magnit has successfully implemented its cost cutting strategy, and the management's projections for the company's FY 2008 EBITDA margin at 7% are quite realistic.
In line with our estimates, the fair value of Magnit is USD 58.8 per share, an upside of more than 43% to the current market valuation.
0.569
0.073
