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Russian retailers rated „outperform” at Credit Suisse on growth

Russian retailers X5 Retail Group NV and Seventh Continent were given „outperform” recommendations by Credit Suisse, which estimates the country’s retail industry will double in size to almost $600 bln by 2010.

Credit Suisse raised X5, Russia's largest supermarket chain, from „neutral” as it started coverage of Seventh Continent, a Moscow-based food retailer. The bank also initiated OAO Magnit, the country's second-largest grocer, with a „neutral” rating. Russians are spending more on food as a ninth year of economic growth boosts their incomes. Real wages in the country may rise on average by as much as 8% a year „in the medium term,” Credit Suisse said in a report today. Russians spent 48% of their disposable income on food last year, according to the bank. „Food retail holds significant potential - the Russian food market could become Europe's biggest within a few years,” Credit Suisse said in the note. „Potential exists for further organic growth and consolidation of the sector.”

Russia is the world's seventh most-populous nation with 144 million citizens. The country's top three food retailers have a combined market share of more than 5%, according to Credit Suisse. The bank expects takeovers in the industry to be led by X5 and international retailers. The bank raised its 12-month stock price target for X5 by 42% to $34.10. X5's shares hadn't traded as of 9:20 a.m. in London, where they are listed. The stock advanced 60 cents, or 2.1%, to $29.60 yesterday, valuing the company at $6.4 billion. It's advanced 14% this year compared with the 0.6% gain in the benchmark Russian Trading System index. Credit Suisse initiated coverage of Seventh Continent with a 12-month price target of $35.70. The shares were unchanged at $27.70 in Moscow yesterday, valuing the company at $2.1 billion. Russian stock exchanges are closed today for a national holiday. Magnit was initiated with a price target of $43.20. The shares added 0.9% to $40.95 in Moscow yesterday, valuing the company at $2.95 billion. They've risen 15% in 2007. (Bloomberg)