IFRS revenues of Russian internet major Mail.ru Group increased by 26% year on year in 4Q20 to RUB32.6bn ($0.43bn), excluding its ESfrorce gaming subsidiary, with the MMO games revenues continuing to be the main top line driver with a 23% y/y gain, albeit down by 10 percentage points quarter on quarter.

Mail.ru also saw a 5pp q/q acceleration of growth in advertising to 10% y/y, a trend similar to Yandex. VKontakte social network accelerated its revenue growth from 13% y/y in 3Q20 to 17% in 4Q20, while revenue from education services soared 3.1x y/y to RUB6bn for 2020.

In the meantime, as revenue growth was mostly driven by the lower-margin games segment, Ebitda margin declined y/y 13% (versus 32% in 4Q19), which BCS GM analysts attributed to different phasing of marketing costs. 

Net income dropped 62% y/y to RUB2.2bn (a 7% margin), amid a decline in Ebitda and an increase in D&A and interest expenses. 

Mail.ru continued to show growth in services in its O2O foodtech and transportation joint venture with Sberbank, with Delivery Club revenues up 2.1x y/y. CitiMobil gross bookings grew 3x y/y.

Mail.ru guidance for 2021 revenue growth is 18-21% to RUB127bn-130bn, due to a more favourable revenue mix (bounce in higher-margin ad segment), but also on an improvement in games and new initiatives. 

"Results for 4Q20 were mixed, as expected – solid on revenue, but a hit to Ebitda from marketing costs allocation," BCS Global Markets commented on March 8. Meanwhile, the company’s outlook for 2021 suggests strong growth for revenue and Ebitda, the analysts believe, reiterating a Buy call on Mail.ru shares.

Sberbank CIB also attributed a 25% drop in Ebitda and thinner margins to the ongoing product investments and a shift in the revenue mix toward the lower-margin games segment.
Still, "the 4Q20 results were strong and beat the Interfax consensus by 8.2% on revenues and 2.4% on Ebitda," Sberbank CIB notes.

"The company’s outlook implies solid revenue of RUB127bn-130bn and a y/y improvement in the Ebitda margin," Sova Capital commented, while seeing the results as "fairly neutral" for the stock and affirming the Buy call on Mail.ru shares.