ATON — 3 April 2019
SISTEMA
FY18 Results and Recent M&A Activity Drive Higher Target Price
We reiterate our OUTPERFORM rating on Sistema and upgrade our target price to RUB20 (+16%, 115% of potential return) after incorporating its FY18 numbers and new estimates into our model, as well as other changes. These include, amongst other things, its increased stake in Ozon, which reported record turnover growth of 70% YoY for FY18, and transactions such as the creation of a microelectronics JV, and the expected merger of Binnopharm and OBL pharma, which may unlock significant potential for Sistema’s stock in future. Nonetheless, we continue to argue that debt reduction will remain the stock’s key catalyst and that it may prompt a rerating.
FY18 results – strong, supported by improving performances in key segments
Revenue momentum in 4Q18 accelerated QoQ, and increased 15.5% YoY to RUB225.1bn, 4% above Interfax consensus. Sistema adopted a new accounting policy (IFRS 15 and 16) from 1Q18 and on a like-for-like basis, the consolidated top line reached RUB219.8bn. All the holding’s major assets with the exception of RTI and Binnopharm showed strong revenue growth.
