Micex Headed for Week High on Magnit Results as Lukoil Advances

Russian stocks headed for the highest level in almost a week as OAO Magnit, the country’s largest retailer, and OAO Lukoil, its second-biggest oil producer, advanced.

The Micex Index (INDEXCF) rose 0.3 percent to 1,509.66 by 1:01 p.m. in Moscow. Magnit led gains with a 1.2 percent jump to 8,421 rubles per share. Lukoil, which has the third-biggest weight in the index, traded up 0.6 percent at 2,101.80.

Magnit’s third-quarter earnings before interest, taxes, depreciation and amortization increased 38 percent compared with the same period last year to 16.8 billion rubles, the company, founded by Krasnodar-based entrepreneur Sergey Galitsky, said in a statement. Its Ebitda margin reached a record 11.6 percent. The growth rate of Lukoil’s gas-station business is similar to Magnit’s, VTB Capital said in a note today.

“Again, Galitsky gives no reason to sell or take profit in the stock,” Kirill Yankovskiy, equity sales director at UralSib Capital in London, said in e-mailed comments.

Magnit has gained 75 percent since the beginning of the year, the best performance of the 50 stocks on the Micex. Magnit and Lukoil have a combined weight of about 20 percent in the gauge.

Lukoil’s gas-station business is “surprisingly similar” to Magnit in terms of geographical coverage and growth rates, while surpassing the retailer by profitability, VTB said. Lukoil pumped its first oil at West Qurna-2 in Iraq and sees commercial production by year end, the company said last week.

“We now switch our tactical focus back to Lukoil, which now represents a better investment opportunity in the oil and gas sector” than OAO Gazprom, the country’s natural-gas export monopoly, analysts led by Dmitry Loukashov said in a note.

Russian equities have the cheapest valuations among 21 emerging economies monitored by Bloomberg. The index is trading at 4.4 times projected 12-month earnings, compared with a multiple of 10.7 for the MSCI Emerging Markets Index.

The dollar-based RTS Index (RTSI$) gained 0.2 percent to 1,495.63, snapping three days of declines.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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