OREANDA-NEWS. October 15, 2009. Magnit has released its September trading update. The company opened 50 stores during the month (one of which is in a hypermarket format, while the rest are discounters), bringing the total for 9mo09 to 399 stores (392 discounters and 7 hypermarkets). At the end of September, the company’s store base had reached 2,981 stores (2,960 discounters and 21 hypermarkets) with selling space increased 28.4% to 967,228 square metres. We remain comfortable with our full-year openings forecast of 503 (net) stores (494 discounters, 9 hypermarkets).

Magnit showed LFL sales growth of 7.3% for 9mo09 (8.4% ticket growth and a traffic decline of 1.1%). We note that in 1H09, Magnit showed LFL sales growth of 8.4% (11.1% ticket growth and a traffic decline of 0.8%), which implies about 6.4% LFL sales growth in 3Q09 (on 5.8% ticket growth and a 1.3% traffic decline). We attribute the slowdown in LFL ticket growth to the negative food inflation growth of -1.1% (seasonal effect of high share of fruits and vegetables), though there has not been any material change in traffic numbers. Our full-year LFL sales forecast is currently 8.8% (9.8% LFL ticket and -0.9% traffic).

Net sales increased 23.8% YoY (in rouble terms) in September, translating into 9mo09 sales growth of 31% YoY. This creates marginal downside risk to our full-year sales growth of 31.5% in 2009 YoY.

We are reiterating our Buy recommendation for the stock: our Fair value of USD 15.7/GDR implies 16% upside potential from current prices. In our view, Magnit’s next catalyst is expected be the release of its 3Q09 IFRS financial results in the beginning of November, when our main focus is set to be on the company’s profitability levels.