The company plans to spend the money received during the placement of bonds to expand its business in the regions, expansion of the vehicle fleet and development of its own network of service stations.
In this review, we will analyze the financial and operational performance of Delimobil's business., to understand, is it worth participating in the placement of bonds.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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What do they earn
According to company report, Delimobil Group's business in Russia consists of several structural units:
- LLC "Carsharing Russia" — provides services under the brand "Delimobil". Main Operating Company of the Group, which forms 97% her proceeds.
- LLC "Enitaim" — provides long-term car rental services under the brand Anytime Prime. This segment accounts for 3% Group revenue.
- Service companies, engaged in maintenance, car washes and refueling of cars, as well as its own driving school.
Delimobil car sharing was launched in Moscow in 2015 by Russian-Italian entrepreneur Vincenzo Trani and his business partner Stanislav Groshov. At the start, the fleet consisted of 100 cars., and in March 2022 — 19 600 machines.
In May 2022, the rating agency ACRA assigned Carsharing Russia a rating of A+(RU) with a stable outlook. The agency noted the rapid growth of the service's revenue despite quarantine restrictions in 2020 — on average 60% per year for the last 3 of the year.
Carsharing Russia LLC and other operating legal entities in Russia are 100% owned by the holding company Delimobil Holding S. A., registered in Luxembourg. Shareholder structure of Delimobil Holding S. A. looks like that:
- Vincenzo Trani (through MIKRO FUND) — 61,6%.
- Minority shareholders — 18,4%.
- VTB Bank (FELL DOWN) — 13,4%.
- Other shareholders (through MIKRO FUND) — 6,6%.
According to the results of July, Delimobil is represented in 10 Cities of Russia — this is the widest coverage among Russian car sharing services. Users can use Yandex Drive cars in 5 cities.
Advantages of the company
The company is growing rapidly in a fast-growing market. In 2021, compared to 2020, the car sharing market in Russia grew by 85% - to 68 billion rubles. The main drivers of car sharing growth in Russia are Moscow and million-plus cities. At the end of 2021, the Moscow car-sharing fleet numbered 30 thousand cars. At the same time, Moscow is the world leader in terms of park size.. In second place is Tokyo, 20,6 thousands of cars, and on the third - Beijing, 15,4 thousands of cars.
According to market participants, its growth will continue and the market may grow in 4 times in the following 5 years. In 2021, car-sharing services were used 11% drivers in Moscow and 10% in St. Petersburg.
At the end of 2021, the leader of the car sharing market in Russia in terms of the number of trips was Yandex Drive with a share 43%. "Delimobil" at the end of the year took second place with a share 34%, although in the second half of 2021 in Moscow, he overtook Yandex Drive: by the end of June, the share of the service in the Moscow market reached 40,5%.
Share of car sharing operators in Moscow by number of trips
| 2019 | 2020 | June 2021 | 2021 | |
|---|---|---|---|---|
| «Yandex-drive» | 59,6% | 58% | 39,9% | 49% |
| Delimobil | 24,6% | 27% | 40,5% | 29% |
The reason for the sharp increase in the share of Delimobil is investment in increasing the car fleet. Another reason, according to which Yandex loses its share, – falling out of old cars from the fleet. To receive discounts on parking spaces, for which the cost of annual parking fees is reduced from 300 to 30 thousand rubles, the age of the car should not exceed three years. "Yandex-drive" was launched in 2018, and in 2021 cars, with which the service started, have lost this benefit, And, probably, were transferred from the Moscow fleet to the regions.
Delimobil has more profitable leasing, than Yandex. Delimobil uses financial leasing in contrast to operational leasing, which is used by "Yandex-drive". The main difference is that, that in the case of operational leasing, the right to the vehicle is assigned to the lessor, and in the case of a financial one, for the lessee. If you simplify as much as possible, then, under the terms of the leasing agreement, Yandex must return the car to the leasing company after the end of the contract term, and Delimobil can use it at its discretion - sell or send it to the regions.
Due to the choice in favor of operating leasing, Yandex's fleet may be reduced this year by 35%. The company will have to return the cars to the lessor, and due to rising prices and lower supplies, it will be more difficult to replace them with new ones..
Moscow authorities love car sharing and give them benefits. In addition to the mentioned benefits for the cost of parking, the Moscow authorities generously subsidize the development of car sharing in the region.. In July, the Moscow government halved the cost of buying parking permits for car sharing operators - from 30 up to 15 thousand rubles. Such a permit gives the right to park in paid parking lots in Moscow, and the car-sharing operator pays for parking. The benefit will be valid until 22 July 2023 for all extensions of valid parking permits.
Since 2018, Moscow has been subsidizing lease payments for car sharing operators. Thanks to subsidies for four years, companies received 516.3 million rubles to update the fleet and purchased more than 24 thousand cars. In May, the Moscow government allocated 450 million rubles to support taxi and car sharing operators - this money will be used to subsidize loan payments, leasing contracts and purchase of new cars.
Revenue and profit of the company is growing. Since we are considering the purchase of bonds, that is, we are going to lend the company a loan, it is important for us to make sure of the financial stability of the company. And in general, everything is good here.. At the end of 2021, the revenue of Carsharing Russia LLC increased in 2 times - from 6,3 to 12.4 billion rubles, — and adjusted EBITDA from a loss of 286 million rubles in 2020 turned into a profit 2,7 billion in 2021.
Financial results of the company, million rubles
| 2019 | 2020 | 2021 | |
|---|---|---|---|
| Revenue | 4600 | 6300 | 12 400 |
| Gross profit | −476 | 72 | 3345 |
| Adjusted EBITDA | −1055 | −286 | 2738 |
The debt portfolio consists of leasing contracts and equity loans, interest on which is accrued, but are not paid. At the end of 2021, delimobil Holding S.A. in IFRS financial statements. commitment to Nevsky Property Finance reflected (NPFL) in the amount of 6.5 billion rubles.
In fact, these obligations are a put option., issued in favor of npfl on shares of a holding company, and the requirements for it do not apply to LLC "Carsharing Russia". Put option can be exercised in the second half 2023, if Delimobil Holding S. A. will not hold an IPO until 30 June 2023, which the company plans to do in Hong Kong in 2023.
Debt burden within the norm. To assess the level of debt, I'll add a few definitions, which will help to understand the level of financial stability of the company.
FFO – Money from Operating Activities – Indicator, which is calculated by the formula:
FFO = PE + Wear and amortization − PR
PE — net profit for the period Depreciation and amortization — depreciation of assets owned by the company
PR — profit from the sale of assets
The ratio of the company's total debt to FFO before net interest payments at the end of 2021 is 6.7×. It shows, how much the company's total debt exceeds the cash flow from operating activities. The lower the value of this ratio, the better for the company. Other car sharing operators do not publish financial statements, therefore, you can't compare it directly to someone.. For example, in "Yandex" this indicator is at the level of 4×, but in addition to car sharing "Drive" in the group there are many other businesses.
The ratio of FFO to net interest payments to interest payments is 2×. Shows, how much cash flow from operating activities covers interest payments on leasing and loans. The higher the value of this ratio, the better for the company. A value less than one says, that the company belongs to the category of "zombie firms" – companies, who are unable to service current loans at the expense of cash flow without attracting additional capital.
Company risks
Prices for new cars and spare parts are rising. According to "AUTOSTAT", from January to March 2022, the cost of popular cars in Russia increased by 20-50%. For example, prices for Kia Rio and Hyundai Solaris, the most popular in the car sharing fleet, increased by March by 22,7 And 28,4% respectively. At the same time, for a full year from 2020 by 2021, prices on average increased by 18%. By May, the price increase continued and reached 30-40%.
Besides, automakers in Russia reduce quotas for new cars for car sharing operators from Russia, and Delimobil 22% cars were received by direct leasing from Volkswagen.
Due to rising prices for spare parts and restrictions in supplies, Delimobil plans to close the Anytime Prime long-term car rental service. Part of the cars, used in the service, will be translated into classic car sharing, and some are sold out.
Option Nevsky Property Finance. In a presentation to investors, the company says, that this option does not extend the requirements to Carsharing Russia LLC and provides for the transfer of shares in the holding company Delimobil Holding S. A. in favor of the option holder. But LLC "Carsharing Russia" forms 80% of the holding's revenue, and disagreements between shareholders, if suddenly they start, may affect the company's business and financial results.
Resume
I would take Delimobil's bonds during the initial public offering and hold them until maturity in August 2025.: this will allow you to fix an increased rate on 3 of the year. The Bank of Russia reduced the key rate to 8% and plans to reduce it further. According to the forecasts of the Central Bank, inflation by the end of 2022 will be 12-15%, and by 2024 it will drop to 4%. With such inflation, the key rate will go into the range of 4-4.5%, and after it the yields of bonds and deposits will fall.
Coupon on Delimobil bonds is permanent, means, throughout the entire period of application, holders will receive 13% per annum. By 2024, if the Central Bank reaches inflation targets, this profitability will be in 3 times the profitability of deposits.
