S&P boosts Magnit

S&P said it raised Magnit’s issuer rating to BB+ from BB, citing its acquisition of Dixy and its record of organic growth and improved profitability.

“Magnit's above-average profitability should support its cash flows, but FFO generation is threatened by inflation and interest rate hikes. We forecast that Magnit's EBITDA margin will remain above average at close to 7% on an International Accounting Standards (IAS) 17 basis and around 11.5% on International Financial Reporting Standards (IFRS) 16 basis. This is almost flat compared with the first nine months of 2021, despite the consolidation of Dixy, which operates on a tighter gross margin. The combined business' gross margins should benefit from Dixy's access to Magnit's unified procurement system, coupled with economies of scale,” S&P said in a press release.

The agency said it also sees Magnit gradually lowering its leverage in 2022-2023 after a spike from the Dixy acquisition. It projects Magnit's adjusted debt to EBITDA will decline, reaching close to 3.1x at the end of 2021, and below 3x in 2022-2023.

The outlook is stable.

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