OREANDA-NEWS. April 13, 2010. LSR Group is due to report its 2H09 IFRS results on 19 April followed by a management conference call later that day.

The company has already released its full year trading update, which came broadly in line with our expectations (development completions differed by 1% while building materials outperformed about 2-4%) and so we do not expect any major surprises from the financial results. We expect to see good YoY numbers in the real estate development business, coming in better than for building materials (with the share of the latter in revenues and EBITDA declining).

On a consolidated basis, we expect the following results.

- Revenues to increase 0.6% YoY in 2H09 in roubles (all YoY changes are in RUB in the report), which translates into 2009 revenues of RUB 48,063mn (down 3.5% YoY). We see real estate development sales accounting for 70.7% of the 2009 total, up from 37.6% in 2008.

- SG&A expenses as percent of sales to decrease from 13.4% in 2008 to 8.6% in 2009, mainly due to reduced labour costs and staff cuts.

- EBITDA to increase 9.7% YoY in 2H09 with the EBITDA margin at 29.1%. For the full year, we forecast EBITDA to grow 4.5% YoY to RUB 13,777mn with an EBITDA margin of 28.7% (vs. 26.5% in 2008). We see the real estate development EBITDA accounting for 78.9% of the 2009 total, up from 41.6% in 2008.

- Net income to reach RUB 3,398mn with a net margin of 12.3% in 2H09, translating into net income of RUB 3,210mn with net margin of 6.7% in 2009 (as compared with the net loss in 2008).

We believe these results will be achieved on the back of the following.

Real estate development segment. We estimate revenues from real estate development to grow 57.9% YoY in 2H09, driven by 24% growth in space transferred to customers and 27% selling price growth. This will result in sales growing 41.3% YoY in 2009 to RUB 36bn. We note that development revenue and COGS do not show the picture for 2009 as they relate to cash sales done in 2006-08.

We see the EBITDA margin from development at 29.1% for 2H09, compared with 26.7% for 2H08, driven by the higher share of elite real estate contracts transferred to customers.

Building materials segment. We estimate revenues from building materials declined 61.2% YoY in 2H09 driven by a 35% average decline in volumes and 30-40% decline in prices. This translates into a 54.6% YoY decline in sales for 2009 to RUB 14bn. We see the EBITDA margin declining from 25.9% to 23.6% driven by the slide in prices.