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)