FOCUS: Yandex beats market’s Q2 expectations, price likely to rise

By Yekaterina Yezhova

MOSCOW, Aug 1 (PRIME) -- Internet company Yandex outperformed market expectations in April–June with the margins improving despite sanctions, analysts said, adding that its quotes will advance.

“Yandex’s report for April–June and January–June not only proved to be expectedly robust but also had some impressive indicators. For example, the issuer’s (April–June) revenue exceeded our outlook by increasing by 45% on the year to 117.748 billion rubles. We expected this indicator to rise only by 36% on the year,” investment company Freedom Finance leading analyst Natalya Milchakova told PRIME.

Investment company Veles Capital analyst Artyom Mikhailin said Yandex’s figures “topped our forecasts and the market’s assessment significantly. As to revenue, the dynamics in the search segment and other initiatives were much above our calculations.”

Yandex’ revenue from online advertisements rose by 22% to 48.430 billion rubles in April–June.  Total adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rocketed to 25.694 billion rubles from 5.780 billion rubles in the same period of 2021. Total adjusted EBITDA margin gained 14.7 percentage points to 21.8%.

Yandex posted a net income of 8.056 billion rubles against a net loss of 4.664 billion rubles in April–June 2021. The adjusted net income leaped to 13.134 billion rubles from 1.012 billion rubles a year earlier, according to the company’s U.S. GAAP financial statement.

Ivan Avseiko, a leading analyst for the technological sector at Otkritie Investment, said the company reported strong financial results for April–June, the period “which fully coincided with the ‘new normality’ mode after the conflict in Ukraine has started. At that, we see not only high growth of revenue in all operating segments, but also improvement of the business margin.”

Milchakova at Freedom Finance said that the company’s new businesses – e-commerce, transport, and logistics – showed very high revenue growth, while the segment’s EBITDA had been negative for a long time, turning positive only in April–June.

The company’s revenue in the segment of e-commerce, mobility, and delivery increased by 53% to 56.474 billion rubles, and total adjusted EBITDA switched to 2.139 billion rubles from a negative of 9.062 billion rubles.

“We would like to reiterate that Yandex had invested heavily in shaping the new ecosystem, but in April–June, the company optimized costs and, in particular, suspended recruiting new staff, including in this fast-evolving segment of business. It became the main factor behind the growth of the company’s EBITDA and its switching to a net profit (from a net loss),” Milchakova said.

Mikhailin at Veles Capital said Yandex has recently resumed hiring new employees.

Revenue of the search and portal segment increased by 31% to 51.233 billion rubles. Adjusted EBITDA jumped by 53% to 28.461 billion rubles, and the adjusted EBITDA margin rose by 8.3 percentage points to 55.6%.

Yandex’s April–June share on the country’s search market widened by 2.4 percentage points to 62.1%, which is the company’s strength, Milchakova at Freedom Finance said. Yandex’s search share on Android devices also rose by 2.4 percentage points to 61.9% and on iOS devices by 6.2 percentage points to 48.4%.

The company’s shares advanced by 8.3% on July 26, when the financial statement was published, to 2,136 rubles on the Moscow Exchange and closed the week at 1,952 rubles.

“Technically, the prospects of Yandex’s shares have also improved after the rise of recent days: the quotes climbed above the resistance of 1,930 rubles and reached their highs since mid-April with the nearest resistance at 2,100 rubles … If they stay above 2,100 rubles, the securities will probably head for 2,350 rubles, after which they may speed up their rise regaining the positions lost this year,” Veles Capital analyst Yelena Kozhukhova said in a note.

Milchakova at Freedom Finance sees the 12-month target at 2,400 rubles.

(61.3101 rubles – U.S. $1)

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