Saturday, 18 April 2020

Magnit (MCX:MGNT) Return On Capital is below average in industry


For some time, Magnit was Russia's largest food retailer. Magnit was founded in 1994 in Krasnodar by Sergey Galitsky. As of March 2016, the company had 12,434 stores in 2,385 locations. They include 9,715 convenience stores, 225 hypermarkets, 2,337 Magnit Cosmetics stores and 157 Magnit family stores. The stock of the company is MGNT (MCX). The company Headquarters are in Krasnodar, Russia. The official company website is http://www.magnit-info.ru. Magnet in English is Magnit (магнит) in Russian.

Public Joint Stock Company Magnit’s (MCX:MGNT) 6.4% Return On Capital is not considered good enough by many analysts. Think carefully when deciding to invest in Magnit. Think about the Return On Capital Employed (ROCE) of Magnit.

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

Magnit has an ROCE of 6.4%.

ROCE is often used when comparing the performance of businesses in the same industry. Magnit's ROCE is much below the 9.3% average in the Consumer Retailing industry. It seems like the competitors are using their capital more efficiently.

3 years ago, Magnit's ROCE was 24%. This could be a sign that Magnit has problematic issues in the recent few years. Of course, investors want to predict what the future holds for this company. It helps to look at past performace to make a forecast for the future.

Current liabilities are those that need to be paid within 12 months (like supplier bills and bank overdrafts). A high level of current liabilities may make a company look like it has less capital employed. Also think about how many assets the company has. Of course, the smart investor would study the balance sheets and income statements of the company. It's possible that companies have advantages and disadvantages in their own way.

Here are Magnit Strengths:

- Has more than 5.309 stores in more than 1.389 locations
- Focuses on selling low-cost Russian made products rather and expensive, imported food products
- Has very popular multi-format retail stores
- Largest food retailer in Russia by number of stores

Here are Magnit Weaknesses:

- Focuses on building a discount network of stores in the far-flung regions.
- Based in the south-western city of Krasnodar (not much in Moscow)

Magnit has growth potential in the huge Russian food retail industry. There are opportunities in creating more stores in mainstream city markets. Lower fuel prices may result in decreased operating costs.

These are the top 3 Magnit competitors:

1. X5 Retail Group
2. Auchan
3. Walmart

Here are the Magnit Subsidiaries:

JSC Tander
LLC Selta
LLC "Tander-Petersburg"
Moroznye pripasy LLC
Limited liability Company "Tandem"
Tk Zelenaya Liniya, Ooo
"Volshebnaya svezhest" LLC
LLC "Vals"
LLC "BestTorg"
LLC "ITM"
LLC 'Alcotrading'
Magnit Finance LLC

No comments:

Post a comment