"Magnet" (MOEX: MGNT) Is the second largest Russian grocery retailer by market share, which is also the leader of the sector in the total number of stores. At the end of 2021, the company owned more than 26 thousand stores, X5 Group has the second place — almost 18 thousand stores.
In early February, the company presented operating and unaudited financial results for 2021, which demonstrated record growth rates for the Russian food market. Let's figure it out, due to what "Magnit" shows such impressive dynamics.
Key operating and financial indicators of the retailer for the fourth quarter of 2021:
- Total revenue increased by 34% from 407 billion to 545 billion rubles. The main reason is the strong growth of the chain of stores.
- The number of Magnit stores for the year increased by more than 4500 to 26 077 through a deal with Dixie and its own organic development program.
- EBITDA in the last quarter of 2021 added 40,5% to RUB 40.167 billion. EBITDA margin was 7,4% against the background of confident dynamics of gross profitability.
- Net profit increased by 36,4% from 11.117 billion to 15.170 billion rubles compared to the same period last year.
Sales structure of the company
The main activity of Magnit is retail trade in food products in its stores. Retailer works within the framework of a multi-format model, which includes convenience stores, drogerie shops, supermarkets, hypermarkets, discounters, online commerce, pharmacies and other formats.
In the fourth quarter of 2021, The total revenue of Magnit increased by 33,7% due to the growth of the retailer's retail space on 20% and growth in LFL sales on 9,9%. An additional driver was a further increase in sales density - revenue per square meter throughout the network in the last quarter of 2021 added 1,6% by the third quarter and 4,7% year to year.
If we go to a more detailed comparison of the results of "Magnit", then the company's growth rates in October and November were stronger, than in December: 35% against 32,5%. Management explains this by the weak performance of the last two and a half weeks of 2021 due to the increase in the incidence of COVID-19 in the regions and the effect of the high base of 2020.: in December 2020, the Russian government made social payments, which allowed all retailers to earn additional profit.
Comparable sales, or LFL sales, quarter-on-quarter accelerated from 8,6 to 9,9% due to a significant increase in the average check of "Magnit", which added 10,7% against the background of high inflation, and excellent performance of stores in the Caucasus and Siberian regions.
The main negative point was the traffic data, retailer results decreased by 0,7% due to anti-Covid measures , a nine-day all-Russian lockdown was introduced at the end of October, and after it, a QR code control system appeared in many shopping centers..
EBITDA increased by 40,5% due to the strong dynamics of gross profit, which was partially offset by higher overall costs and the consolidation of Dixie's business with lower profitability. The latter reason also led to an increase in Magnit's net debt., this indicator increased year-on-year by 62% from 121.4 to 197 billion rubles, but remained at a completely safe level - the current multiplier "net debt" / EBITDA »equal 1,5.
Record sales in the fourth quarter led to, that the company earned its maximum quarterly net profit over the past 5 years — this indicator has increased by 36% to 15.170 billion rubles. Net profit margin increased by 6 b. P. year-on-year to 2,8%.
The main indicators of Magnit
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Revenue | 407,227 | 544,552 | 33,7% |
| Comparable sales | 7,4% | 9,9% | 250 b. P. |
| EBITDA | 45,957 | 62,853 | 36,8% |
| EBITDA margin | 7% | 7,4% | 36 P. P. |
| Net profit | 11,117 | 15,170 | 36,4% |
| Net profit margin | 2,7% | 2,8% | 6 P. P. |
| net debt | 121,4 | 197 | 62% |
Main Driver
The main driver of Magnit's growth in 2021 is the acquisition of almost 2500 Dixie stores., which allowed the Krasnodar retailer to significantly increase sales in the most important regions - Moscow and North-West, since they occupy a share 29% in the food retail market of Russia. 1757 out of 2477 purchased dixy stores are located in the Moscow and Leningrad regions.
In the future, the Krasnodar company, probably, will face the problem of reformatting Dixie stores under its brand "Magnit", but so far the management has made an interim decision: Dixy business will continue to operate as a separate legal entity, and stores to operate under existing brands. Taking into account the current pace of updating Magnit stores - 700-900 units per year - the transformation of the purchased asset may last more than 3 years.
Beyond Deal M&A, It is also worth highlighting two directions, which have multiplied in 2021: online commerce and discounters. Let's start with e-commerce: In the third quarter of 2020, Magnit launched this direction in order to catch up with the sector leader - X5 Group. So far, this has not been possible., but the gap is gradually narrowing.
In the fourth quarter, the total turnover of Online Commerce Goods of Magnit increased 18.5 times to 6 billion rubles against 17.2 billion rubles for X5. If in the third quarter of 2021 the difference in results with the leader of the sector was fourfold, now this value has fallen below three times the indicator.
The second fast-growing direction of the retailer is discounters. Magnit began testing the new format in July 2020 as a response to the rapidly changing economic situation in the country.. In 2021, the my price discount chain had 190 stores compared to 15 stores a year earlier.
Results of the direction of online commerce "Magnit"
| 4к2020 | 4к2021 | The change | |
|---|---|---|---|
| Total turnover of goods, billion rubles | 0,3 | 6 | 18,5 Times |
| Average orders per day | 3959 | 62 274 | 15,7 Times |
| Average check, rubles | 912 | 1074 | 17,8% |
| Number of stores covered | 1290 | 4490 | 3,5 Times |
Dividends
In the dividend policy, Magnit does not have a fixed rate of profit distribution, at the same time, the Krasnodar company in the last three years - after the change of ownership in 2018 - is trying to pay its shareholders the maximum possible dividend, making payments twice a year for 9 And 12 Months.
Earlier, the retailer distributed a dividend for 9 months of 2021 in the amount of 294,37 R. If management decides to stick to last year's payout principle, then the shareholders for 12 months will receive the same dividend in the amount of 294,37 R, and the annual distribution for 2021 will then be 588,74 R. The projected dividend yield in this case will be at the level of 11%.
Besides, the management of "Magnit" thought about holding a buyback against the background of a strong drop in the company's quotes. Share buyback management considers as an additional way of allocating capital, which will not lead to a reduction in dividend payments.
Dividend history of Magnit
| 6m2017 | 115,51 R |
| 12m2017 | 135,5 R |
| 9m2018 | 137,38 R |
| 12m2018 | 166,78 R |
| 9m2019 | 147,19 R |
| 12m2019 | 157 R |
| 9м2020 | 245,31 R |
| 12м2020 | 245,31 R |
| 9м2021 | 294,37 R |
Comparison with competitors and forecast for 2022
"Magnit" in the fourth quarter of 2021 showed one of the strongest results in the Russian food market, mainly due to the deal on the purchase of Dixie stores. This trend will still continue in the first half of 2022 due to the low base. 2021 — the Results of Dixie krasnodar company consolidated in its reporting in the second half of last year.
Thereafter, if there are no new transactions M&A, growth rates of Magnit, probably, will fall to historical mean values, which correspond 10%.
Strong results of 2021 allowed management to announce a good forecast for 2022, which reflects the company's high requirements for profitability and a constant focus on operational efficiency. As part of the organic growth program, the retailer plans to open more than 2,000 new stores and update about 900 old stores., as well as increase the results of e-commerce in 2 Times.
Comparison with competitors by results 4 quarter
| Revenue Growth Rate | LFL sales | Growth of the chain of stores for the year, things | Growth of the chain of stores for the year | |
|---|---|---|---|---|
| Magnet | 33,7% | 9,9% | 4513 | 20,9% |
| X5 Group | 14,7% | 9% | 1414 | 8% |
| Fix Price | 14,5% | 3,2% | 737 | 17,7% |
| Child's world | 6,3% | −2,3% | 251 | 28,9% |
| ribbon | 18,6% | 7% | 364 | 92,6% |
| OK | 10,4% | 6,9% | 35 | 17,9% |
Magnit's forecast for 2022
| 2021 | Forecast of 2022 | |
|---|---|---|
| Number of new store openings | 2295 or 4513 with Dixie | > 2000 |
| Number of updated stores | 703 | ~ 900 |
| Growth in the overall online turnover of goods | in 32 Times | > in 2 Times |
| Capital expenditures, billion rubles | 65,9 | 80—85 |
What's the bottom line?
"Magnit" published strong financial and operating results for 2021, which year-on-year increased by more than 30%: revenue increased by 34%, EBITDA - on 37%, net profit — on 36%. Investors reacted positively to these data.: the company's quotes rose almost by 2%.
The nearest driver of the company's growth will be the second dividend payment for 2021. By analogy with past distributions, it should take place in the early summer of 2022 and may bring dividend yields to shareholders. 5,7% given that, that the payment itself will be at the level of 294,37 R.
