MOSCOW: Russia's most popular search engine Yandex NV beat quarterly profit forecasts and played down a recent market share decline as a typical symptom of a competitive market.
Yandex, which raised $1.43 billion in a Nasdaq IPO in May, said on Thursday its net profit rose 93 percent to 1.71 billion roubles ($55.5 million) against a 1.53 billion average forecast in a Reuters poll of banks and brokerages.
It also slightly increased its full-year revenue growth forecast to between 58 and 60 percent from 55-60 percent
"While our markets are fluid and competitive by nature, they are large and are growing rapidly," Chief Executive Officer Arkady Volozh said on a conference call.
"Yandex is and will continue to be the market leader and will continue to drive strong growth."
Yandex shares rose 12 percent at the market open, outperforming Nasdaq which was up 2.7 percent, although they later faded to be up 5.3 percent at $27.28 by 1437 GMT.
That was above the company's $25 a share IPO price, but some way below the $38.84 level the stock reached at the end of its first day of trading.
A nalysts at brokerage Uralsib said they would put their share price target for Yandex under review. "Yandex's strong results should support the share price and make our model look overly conservative on short-term growth," they said in a note.
An analyst at a Western bank, who asked not to be named, said: "This is a very serious win against market expectations and the management seem to be feeling very confident. They raised their guidance and I think they are still very conservative in it."
Yandex leads world no.1 search engine Google Inc in its domestic market, but the US group has begun eating into its market share due to increased promotion of its Chrome browser.
"Russia is an attractive, high-growth market and search has always been competitive here Yandex is fighting back and we managed to break the trend," Volozh said.
According to consultancy Live Internet, Yandex's share of the Russian search market averaged 62.7 percent in the third quarter, down from 64.6 percent in the previous three months.
"In the long run, clear market leadership is more important to financial performance than the magnitude of that lead which is likely to fluctuate over time," Volozh said.
Russian web-based companies have proven attractive to investors due to the high potential for growth both in the home and CIS markets.
Yandex was the biggest Russian IPO of the year to date, while fellow internet group Mail.Ru raised over $1 billion late last year.
Yandex's revenue soared 65 percent in the quarter to 5.16 billion roubles, above the 4.92 billion forecast, with text-based advertising revenue accounting for 89 percent of the total. The company reiterated its capital expenditure guidance at up to 6.3 billion roubles.
Earnings before interest, tax, depreciation and amortisation, adjusted for stock-based compensation, grew 54 percent to 2.34 billion roubles as the company invested heavily in growth.
The EBITDA margin therefore slid to 45.3 percent from 48.5 percent a year ago.
Volozh said the EBITDA margin was historically higher in the fourth quarter but could not provide guidance.
Yandex's bottom line was supported by a 383 million rouble foreign exchange gain in against a year-ago loss and the company said net profit adjusted for the gain was up 49 percent to 1.46 billion roubles.
Copyright Reuters, 2010
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