OREANDA-NEWS. September 08, 2010. Magnit released a trading update for July and August, revealing 9.8% YoY LfL sales growth in July and 12.6% in August. Net retail sales for 8M10 increased 34% YoY in ruble terms (45% in dollar terms), reported the press-centre of OTKRITIE Financial Corporation.

View: Strong July-August LfL data indicates that the new pricing policy is paying off. Though the aggressive investments into prices implies a rather substantial decline in gross margin (in 1H10 the retailer’s gross margin contracted by 182bps YoY), it eventually bolsters the operating efficiency of the company and therefore supports margins.

Valuation and Action: The stock trades on a 2011 EV/EBITDA of 11.7x, which is a 6% premium to EM peers. Based upon the strong performance we will review our model for Magnit. The results are supportive of our positive view on the company.