Daily analyst comments

M Video posts strong FY 2008 financials


	M Video

Capitalization: 930 809 530,81 $

Common shares
Price	6,22 $

Price changing
week	month	year
-0,2%	-4,4%	108,9%

02.07.09 10:16

We are upbeat on the FY 2008 report from M Video: the company shows robust sales indicators, improved margins and an optimized debt load. We believe, however, that the company’s FY 2008 results have already been accounted for in its current stock valuations. M Video’s 1Q 2009 financial report should cause a more relevant market response.

Russian consumer electronics retailer, M Video (RTS: MVID) has announced its FY 2008 financial results. The company’s US dollar-denominated revenue grew by more than 40% in the reporting period, thanks to an increase in LFL sales and the large number of new store openings: in 2008, M Video opened 27 new hypermarkets.

Table. M Video: key financials FY 2008, USD million

	2007	2008	Change 2008/2007
Revenue	2,047.6	2,870.9	40.2%
Gross profit	468.3	717.9	53.3%
Gross margin	22.9%	25.0%
Operating profit	81.6	107.0
Operating margin	4.0%	3.7%
EBITDA	102.0	140.7	37.9%
EBITDA margin	5.0%	4.9%
Net profit	25.4	49.2	93.5%
Net margin	1.2%	1.7%

Source: company data, Finam estimates

We are generally upbeat on M Video’s FY 2008 report, as the retail chain managed to boost margins and optimize debts. We believe, however, that the company’s FY 2008 financial results have already been accounted for in its current stock valuations, and its 1Q 2009 report should elicit a more direct market response. At a time when demand in the consumer retailing segment has become more sensitive to the economic climate, M Video may see its sales down. In 1Q 2009, the retail chain posted a 28% downturn in sales in ruble terms.

We reiterate a positive long-term view on M Video. In line with our estimates, the fair value of M Video is USD 4.30 per share, which implies an upside of more than 90% to the current market valuation.

Sergey Filchenkov

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