X5 Retail: revenue up 11.3%, but net profit down 27.6% on finance costs

On August 13, X5 Retail reported H1 2026 results: revenue grew 10.5% to RUB 2,480.5 bn, EBITDA rose 8.7% to RUB 141.9 bn, while net profit fell 28.4% to RUB 35.3 bn. The review shows that operations remain strong, but higher finance costs and taxes are eating into profit.

Key takeaways

— H1 revenue grew 10.5% driven by retail and digital sales

— EBITDA margin fell 0.1 pp to 5.7%, but adjusted margin rose

— Net profit fell 28.4% due to higher finance costs and taxes

— Leverage remains low: net debt / EBITDA LTM – 0.86

— Capex increased, but operating cash flow covers it

— Dividend yield 34.2% – above fair, but payment uncertain

— Stock cheaper than its 3-year history: EV/EBITDA LTM – 2.53 vs average 2.59

Key figures, RUB bn

H1 revenue grew 10.5% driven by retail and digital sales

In H1 2026, X5 Retail's revenue reached RUB 2,480.5 bn, up 10.5% year-on-year. The main driver was retail: net retail sales grew 10.8% YoY, with selling-space expansion adding 8.0% and LFL growth 6.1%.

X5 Digital sales grew 26.6% YoY and now account for 7.5% of consolidated revenue. In Q2 2026, revenue reached RUB 1,190.6 bn, up 11.3% YoY. Growth slowed from 20.7% in Q1 2025 but remains double-digit.

EBITDA margin fell 0.1 pp to 5.7%, but adjusted margin rose

EBITDA for H1 grew 8.7% to RUB 141.9 bn, but margin fell 0.1 pp to 5.7% (vs 5.8% a year earlier). The decline is due to faster growth in expenses, including depreciation and impairment.

Meanwhile, adjusted EBITDA pre-IFRS 16, which the company considers its key operating metric, reached a margin of 5.4% in Q2 vs 4.8% a year earlier. Gross margin also rose 0.74 pp to 24.1%, indicating sustained pricing power.

Net profit fell 28.4% due to higher finance costs and taxes

Net profit for H1 was RUB 35.3 bn, down 28.4% YoY. In Q2, the decline was 27.6% to RUB 13.3 bn. Operating profit rose 31.2%, indicating pressure below the operating line.

Key factors were higher finance costs and taxes. The weighted average effective interest rate on borrowings fell to 16.54% (vs 20.72% a year earlier), but debt increased, raising interest payments. Additionally, the company recognized an impairment loss of RUB 1,898 mn for the half-year.

Leverage remains low: net debt / EBITDA LTM – 0.86

At the end of H1, net debt was RUB 228.5 bn, corresponding to 0.86 EBITDA over the last 12 months. Net debt decreased by RUB 24.8 bn over the half-year but increased by RUB 52.3 bn over 12 months.

The company complies with loan covenants: net debt / EBITDA pre-IFRS 16 is 1.08x (vs 0.84x at end-2025). The increase in debt is due to higher capex and acquisitions.

Capex increased, but operating cash flow covers it

In Q2 2026, operating cash flow was RUB 33.0 bn, while capex was RUB 38.7 bn, resulting in negative free cash flow. For H1, adjusted capex was RUB 93.4 bn, lower than the RUB 99.3 bn in H1 2025.

The company is actively expanding selling space (8.0% growth) and developing digital services, requiring investment. Operating cash flow over the last 12 months was RUB 237.9 bn, covering capex, but free cash flow remains under pressure.

Dividend yield 34.2% – above fair, but payment uncertain

Over the last 12 months, X5 Retail paid dividends of RUB 613 per share, providing a yield of 34.2% at the current price. Our model estimates the next payout at RUB 613 per share, implying a forward yield of 34.2%.

The fair yield for this issuer, in our view, is 21.4%, significantly lower than the current. However, the company is conservative in dividend policy: the last payment was in late 2025, and no new announcements were made in the H1 report. The implied payout ratio in our model is 0.86 of profit.

Stock cheaper than its 3-year history: EV/EBITDA LTM – 2.53 vs average 2.59

The current EV/EBITDA multiple over the last 12 months is 2.53, below the three-year average of 2.59. P/E LTM is 5.44, also indicating a low valuation.

After the report, shares fell 3.4% on the release day and 9.1% from the release to August 17. Market capitalization is RUB 441.1 bn. Despite the drop in net profit, operating metrics remain strong, making the valuation attractive but requiring caution due to profit pressure.

Valuation on the latest reported figures

Bottom line

X5 Retail's operations remain strong: revenue is growing at double-digit rates, gross margin is expanding, and leverage is low. However, net profit is falling due to finance costs and taxes, which has already weighed on the share price. For shareholders, the key question is whether the company can restore profitability through lower rates or operational efficiency, and whether the dividend will be maintained at current levels.