IDGC North West: revenue growth slows, but Q2 EBITDA doubles

On August 25, IDGC North West reported Q2 2026 results: revenue rose 12.7% YoY to RUB 19,583 million, while EBITDA doubled to RUB 2,541 million. This review examines what drove the margin jump and why operating cash flow turned negative in the quarter.

Key takeaways

— Q2 EBITDA doubled, but the margin is still below the average of previous years

— Revenue growth slowed to +12.7% – the weakest pace in the last four quarters

— Operating cash flow turned negative at RUB 414 million due to working capital build-up

— Net debt fell to RUB 579 million, but the debt-to-EBITDA ratio remains low

— Capex rose to RUB 2,333 million, exceeding operating cash flow

— No dividends are paid, and the model implies zero payouts going forward

— Shares trade at a discount to their own history: EV/EBITDA 0.74 vs 1.14 average

Key figures, RUB bn

Q2 EBITDA doubled, but the margin is still below the average of previous years

In Q2 2026, EBITDA grew 119.8% YoY to RUB 2,541 million. This is a sharp jump after a weak Q2 2025, when the figure was RUB 1,156 million. The EBITDA margin reached 13.0% versus 6.7% a year earlier.

However, 13.0% is noticeably below the average level of the last four quarters, which exceeds 20%. In Q4 2025 the margin was 25.1%, and in Q1 2026 – 24.0%. Thus, the doubling of EBITDA in Q2 is more of a return to normal after last year's slump than a new trend.

Revenue growth slowed to +12.7% – the weakest pace in the last four quarters

Q2 2026 revenue amounted to RUB 19,583 million, up 12.7% YoY. This is a noticeable slowdown compared to previous quarters: Q1 2026 growth was 21.1%, Q4 2025 – 29.0%, and Q3 2025 – 34.5%.

Nevertheless, over the last 12 months revenue reached RUB 88,300 million. The company continues to grow at double-digit rates, but the dynamics are clearly cooling. If the slowdown continues, it could affect the company's ability to generate profit.

Operating cash flow turned negative at RUB 414 million due to working capital build-up

Operating cash flow in Q2 2026 was minus RUB 414 million versus plus RUB 652 million a year earlier. This is the first negative quarterly figure in the period under review. The reason is working capital build-up, which consumed operating profit.

Over the last 12 months, operating cash flow is still positive at RUB 8,600 million. However, quarterly volatility is high: in Q1 2026 the figure was RUB 5,034 million, and in Q2 it was already minus RUB 414 million. This should be considered when assessing the company's ability to finance investments.

Net debt fell to RUB 579 million, but the debt-to-EBITDA ratio remains low

At the end of Q2 2026, net debt stood at RUB 579 million – the lowest level in the period under review. Debt decreased by RUB 0.5 billion over the quarter and by RUB 4.7 billion over the last 12 months. The company is actively paying down debt.

The net debt to EBITDA ratio for the last 12 months is 0.19. This is a very low level, indicating financial stability. However, it is worth remembering that EBITDA for the last 12 months includes weak quarters, so the actual debt burden may be somewhat higher.

Capex rose to RUB 2,333 million, exceeding operating cash flow

Capex in Q2 2026 amounted to RUB 2,333 million – up 50% YoY (RUB 1,551 million a year earlier). Capex growth continues: over the last 12 months, investments reached RUB 11,240 million, exceeding operating cash flow for the same period (RUB 8,600 million).

The gap is covered by debt reduction and possibly asset sales. But if capex remains at this level and operating cash flow does not recover, the company will have to either increase debt or cut investments. For now, debt is minimal, so this is not critical, but it is worth watching.

No dividends are paid, and the model implies zero payouts going forward

Over the last 12 months, the company has not paid dividends, and our model estimates the next payout at RUB 0.0 per share. With a fair yield of 12.0% and a payout ratio of 0.29 of profit, the company could pay dividends, but it does not.

The absence of dividends despite low debt and positive profit is a deliberate choice by management, likely related to the investment program. For shareholders, this means returns are generated only through capital appreciation, which may be attractive at the current valuation.

Shares trade at a discount to their own history: EV/EBITDA 0.74 vs 1.14 average

EV/EBITDA for the last 12 months is 0.74, significantly below the three-year average of 1.14. This means the market values the company cheaper than usual. P/E is also low at 1.66, reflecting high profitability relative to market cap.

The low valuation may be due to slowing revenue growth and dividend uncertainty. However, given the current debt level and ROE of 8.5%, the shares look undervalued if the company maintains financial discipline.

Valuation on the latest reported figures

Bottom line

The strong side of the report is the doubling of EBITDA and the reduction of net debt to a minimum level. However, this is partly due to the low base of the previous year, and operating cash flow turned negative. The key question for a holder is whether the company can restore cash generation amid rising capex and slowing revenue. The valuation remains attractive, but requires confirmation of financial discipline.