Micex Climbs to Week High on Magnit Results as Lukoil Advances

Russian stocks rose to the highest level in almost a week as oil advanced and OAO Magnit, the country’s largest retailer, reported record profitability.

The Micex Index rose 0.5 percent to 1,511.51 by the close in Moscow. Magnit jumped 2.4 percent jump to 8,520 rubles. OAO Tatneft, a regional oil producer, added 1.2 percent to 216.49 rubles as oil, Russia’s chief export earner, advanced for a third day.

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, a measure of profitability, reached a record 11.6 percent.

“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 77 percent since the beginning of the year, the best performance of the 50 stocks on the Micex. OAO Lukoil, which has the third-biggest weight in the index, traded up 0.3 percent. The growth rate of Lukoil’s gas-station business is similar to Magnit’s, VTB Capital said in a note today.

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 gained 0.1 percent to 1,493.11, snapping three days of declines.

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