FOCUS: Spectacular fundamentals, strong outlook push HeadHunter quotes to new highs

By Yekaterina Yezhova

MOSCOW, Dec 16 (PRIME) -- Russia’s leading online recruitment service HeadHunter has disclosed robust financial results for July–September and would hardly miss its 2019 guidance, promising good stock performance, analysts said.

“The recent financial results are strong. Now the company should maintain its current high growth rates, while slower progress will undermine its quotes,” investment company Algo Capital senior risk manager Vitaly Manzhos told PRIME.

HeadHunter’s revenue increased 30% on the year to 2.1 billion rubles in July–September, as calculated under International Financial Reporting Standards.

Domestic revenue grew 29.1% to 2 billion rubles “mainly driven by an increase of 39.7% in the number of paying customers in small and medium accounts and an increase of 19.9% in the average revenue per customer in the key accounts in Moscow and St. Petersburg”, as the company said in its statement.

The net income soared 69.8% to 571 million rubles. Adjusted EBITDA rose 34.8% to 1.145 billion rubles with the adjusted EBITDA margin gaining 2 percentage points to 53.5%.

“Against the backdrop of a challenging macro environment, we continued to deliver strong revenue growth in the key market segments as a result of balanced monetization and customer acquisition strategies. Also this quarter, we continued demonstrating our ability to increase revenue whilst improving profitability,” HeadHunter CEO Mikhail Zhukov said in the statement.

The service expects its 2019 revenue to grow 27–28% and the adjusted EBITDA margin to be 50–51%.

“The results were strong and topped the guidance. The company is well on track to deliver on its 2019 outlook. We like HeadHunter’s monetization plan and think it makes sense given its dominant position in the segment, as well as the under-monetization of its key accounts. We thus see the risks of increased churn rates as minimal,” Sberbank CIB said in a research note.

The company started disclosing its financial results after an initial public offering (IPO) on the Nasdaq on May 9, and its American depositary receipts (ADRs) have advanced 41.3% since the closure of its first session to U.S. $22.26 on December 12.

“The stock outperformed the Russian stock indexes. We expect its ADRs to trade within a $19–22 range till the end of 2020. Next year they could rise to $22–24,” said Natalya Milchakova, deputy head of information and analytical center Alpari.

Manzhos at Algo Capital said the IPO was quite a success, which along with a new historic maximum of the stock thanks to the July–September figures, had shaped a positive technical picture in the short and mid-term.

“The company’s dividends for 2018 stood at $0.36 per share, equal to an ADR. Further dynamics of the quotes will depend on the next quarter results, which could be strong. Technically, its ADRs have no ‘ceiling’ for growth, but it’s only because of their short period of trading. Chances of a strong rise of the quotes’ value in the long-term would depend on the company’s expansion beyond the CIS, which will not happen soon,” Manzhos said.

Milchakova at Alpari said HeadHunter’s share on the domestic market stands at 54% with almost no peers inside the country or in some CIS countries.

“Expansion of the company’s activities in the CIS and monetization of traffic are its important points of growth in the current year and will continue to influence its financial results in 2020,” she told PRIME.

The U.S. stock market trades 25 firms of the Staffing and Outsourcing Services sector, and HeadHunter is the seventh among them by capitalization, leading the sector’s second echelon, which is very good for a Russian company.

Only two foreign firms trade in the sector: HeadHunter and China’s 51job, Manzhos at Algo Capital said.

“In the age of massive startups, whose main task is to reach a break-even point, HeadHunter stands apart thanks to its resilient and mature business model. It differs hugely from its peers because it works in Russia and other six CIS countries.

“In other words, it’s just a strong regional company trading in the U.S. Evidently, in case of a heavy fall of the ruble or bad economic woes in Russia, the dollar-denominated results of HeadHunter would slump significantly. We also should not forget about the existing sanction risks for the country and its companies.”

(62.5544 rubles – U.S. $1)

End