FOCUS: Yandex split stays in investor focus as it reports good Q3 results

By Yekaterina Yezhova

MOSCOW, Nov 7 (PRIME) -- Investors seem to have shrugged off the mostly strong July–September financial results of Yandex, whose ordinary shares have eased 2.2% over the week, as they closely watch for any news about the Internet company’s restructuring, analysts said.

“We see the results as robust. They topped our expectations on revenue and adjusted EBITDA,” Sinara Investment Bank senior analyst Konstantin Belov told PRIME.

Yandex’s total revenue increased by 54% on the year to 204.8 billion rubles. Total adjusted EBITDA rose by 33% to 26.5 billion rubles, while the total adjusted EBITDA margin contracted 2 percentage points to 13%.

Investment company Finam analyst Leonid Delitsyn said that the market was discouraged by a 83% fall of the net income to 7.7 billion rubles.

“The main intrigue lies in how Yandex will be split, the terms of the sale of the controlling stake in the Russian business to a consortium of strategic investors and whether the Russian minority owners will be offered to convert Yandex N.V. shares into the shares of the Russian firm that will consolidate business in the Russian Federation as a result of restructuring,” Belov at Sinara Investment Bank said.

Yandex said it received one of the required approvals from the government commission for control over foreign investment. “The proposed restructuring will be subject to further shareholder approval, including a separate approval by our Class A shareholders, and the company continues to aim at bringing a restructuring proposal to the shareholders for approval by the end of this year,” the company said in its July–September statement.

Digital Development Minister Maksut Shadayev said on November 1 that the ministry expects to get the materials on the deal at the end of 2023 or at the beginning of 2024.

“It has recently transpired that a consortium of Russian investors will get control over Yandex whose total business is valued at U.S. $5.5 billion,” Delitsyn said adding that the investors will control the company by spending only $2.75 billion, or one tenth of the company’s peak value, on the purchase.

“After that they as well as analysts and media will certainly have a difficult task to encourage the market to boost the company’s shares to the previous highs. At the moment, the dramatic fall of the profit does not encourage investors, but the management will think about it under the new owners already,” the Finam analyst said.

Yandex’s ordinary shares eased 2.2% over the week closing at 2,615.80 rubles on November 3 on the Moscow Exchange. Sinara Investment Bank set the year-end price target at 3,500 rubles per share with a Buy rating.

“The Search and Portal segment still generates most of the profit mainly thanks to incomes from online advertising that shows the company’s leading positions on the market of Internet search,” Belov added.

Revenue of the Search and Portal segment advanced by 48% to 90.4 billion rubles as the company’s traditional search business wins so far from the recovery of the Internet advertising market, Delitsyn at Finam said.

“It is explained not only by the fact that the Russian advertising market’s volume has recovered -- it grew by 19% in January–June in comparison with the same period of 2021 – and it is now aiming at a new record,” the analyst said.

The Russian Association of Communication Agencies calculated that the country’s advertising market expanded by 27% on the year to 315 billion rubles in January–June.

Yandex’s share on the Russian search market added 0.6 percentage points to 62.6%. The search share on Android also rose by 0.6 percentage points to 62.5% and the share on iOS edged up 1.5 percentage points to 49.8%.

Revenue of the company’s E-commerce, Mobility, and Delivery segment leaped by 69% to 107.2 billion rubles.

The gross merchandise value (GMV) of mobility – by which the company means the total amount paid by its customers for ride-hailing, car-sharing, and scooter rent services – increased by 51% to 299 billion rubles. Revenue increased by 46% to 45.2 billion rubles in July–September.

GMV of e-commerce – as the value of all merchandise sold through Yandex Market, Yandex Lavka, Yandex Eats, and Market Delivery – rose by 67% to 121.2 billion rubles. Revenue rocketed by 79% to 42.2 billion rubles.

“Yandex started releasing the indicators of e-commerce services separately from ridetech. It counts because e-commerce is the core direction of growth, while ridetech approaches the stabilization stage,” Delitsyn told PRIME.

E-commerce shows higher growth rates than ridetech. “The figures prove viability of Yandex’s strategy and its success in a kind of ‘surfing’ from one technological wave of ridetech to another one of e-commerce,” the Finam analyst said.

(93.0351 rubles – U.S. $1)

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