FOCUS: Yandex outperforms Mail.ru in Q1 as taxi segment surges

By Yekaterina Yezhova

MOSCOW, May 11 (PRIME) -- Yandex showed stronger January–March results than Mail.ru Group thanks to burgeoning ride-hailing and sales while both Russian tech giants enjoyed recovery of the advertising market, analysts said, adding an acquisition of a small bank would help Yandex grow more.

“Currently, when evaluating Yandex and Mail.ru Group’s quarterly results, revenue comes to the fore in terms of importance because Yandex and Mail.ru Group represent a rapidly growing IT industry. The crisis year of 2020 broke the relative equilibrium of the Russian and global economies making year-to-year dynamics of profit or loss not illustrative,” investment company Algo Capital senior risk manager Vitaly Manzhos told PRIME.

“Yandex and Mail.ru Group evidently lay the ground for future profit growth in the ongoing technological race and fight for the target markets, and their revenue reflect their success in the competition.”

By revenue, Yandex outperformed Mail.ru Group in January–March.

Under the U.S. GAAP standards, Yandex’s total revenue, including the results of Yandex.Market from July 24, 2020, the date of consolidation, jumped by 56% on the year to 73.136 billion rubles. Online advertising revenue rose by 20% to 35.996 billion rubles, accounting for a half of total revenue. “The growth was primarily driven by strong performance in the Search and Zen advertising revenues,” the Internet company said in a quarter statement.

Revenue related to the Taxi segment, excluding sales of goods, advanced by 57% to 20.733 billion rubles, accounting for a third of total revenue. The segment includes revenue from ride-hailing, logistics, Yandex.Eats and Yandex.Drive businesses, but excludes revenues related to the sales of goods from Yandex.Lavka.

“The increase of revenues related to the Taxi segment was attributed to the recovery of our ride-hailing business driven by the acceleration of both rides and gross merchandise value growth amid easing COVID-related restrictions as well as the strong performance of Yandex.Eats and logistics businesses,” Yandex said.

Revenue from the sales of goods skyrocketed to 10.868 billion rubles from 1.189 billion rubles a year earlier.

Under the International Financial Reporting Standards, Mail.ru Group’s total group aggregate segment revenue increased by 27.4% to 28.290 billion rubles. Online advertising revenue rose by 22% to 10.471 billion rubles with the company’s social network VK remaining the growth engine.

Revenue from massively multi-player online (MMO) games jumped by 34.3% to 9.424 billion rubles with the overall MY.GAMES business expanding by 42.2% despite no new game launches in January–March. “Although April–June presents a challenging base for the growth of online games businesses globally, we remain committed to double-digit organic growth for MY.GAMES in 2021, with year-over-year improvement in profitability,” Mail.ru Group said in a quarter statement.

Mail.ru Group also said its EdTech projects – Skillbox and GeekBrains – were the largest contributors with revenue tripling to 2.2 billion rubles in January–March. “EdTech is expected to deliver up to 9 billion rubles in revenue, with a positive EBITDA margin in 2021,” the company said.

Investment company Sberbank CIB said Yandex beat the consensus by revenue, while Mail.ru Group was close to it.

“Mail.ru Group noted that in food delivery it had managed to retain customers acquired during the lockdown, while it has seen higher customer engagement in online groceries. We believe the latter trend, together with the expanded dark store network, has allowed Samokat to bypass Yandex.Lavka in revenues in January–March. However, Citymobil’s growth looks modest compared to that of Yandex.Taxi, which had a much higher base than Citymobil to begin with,” Sberbank CIB said in a note.

Manzhos said that if the trend persists, the gap between Yandex’ and Mail.ru Group’s revenue may widen significantly.

Based on the January–March performance, Yandex expects its 2021 revenue to reach 315–330 billion rubles, and Mail.ru Group set its guidance at 127–130 billion rubles.

“We should also mention the recent news that Yandex is acquiring small bank Acropol for 1.1 billion rubles, which is anticipated good corporate news. There is no secret that it is a bank that the IT holding’s ecosystem lacked, and now Yandex’s competitive position will be cemented further,” Manzhos told PRIME.

Yandex earlier failed to buy TCS Group with Tinkoff Bank for U.S. $5.48 billion. “This much cheaper entrance into the banking business may be a good strategic step for Yandex. Besides, a small bank adjusts to an ecosystem much easier,” he said.

Manzhos set the target price for Yandex’s shares on the Moscow Exchange at 4,500–6,000 rubles for the end of 2021. “Mostly likely, the stock will fluctuate at a 5,000 ruble notch, the point of attraction since August 2020. The target for Mail.ru Group is set at 1,500–2,500 rubles, in the middle. There are still no stimuli for a strong increase,” he said.

Yandex has fallen 6.6% since the beginning of the year, closing at 4,818.40 rubles on May 7, and Mail.ru Group has plunged 17.8% to 1,634.60 rubles.

“We should also keep in mind the remaining serious regulatory risks for the issuers since the country’s laws have been toughened for many years, including high requirements to data circulation, restrictions on foreign capital, and frequent antitrust complaints, which lead to additional costs. Such risks could be of higher importance for the quotes than the financial results,” Manzhos said.

(74.1373 rubles – U.S. $1)

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