AliExpress Russia, an e-commerce joint venture developed by Mail.ru Group, Alibaba, MegaFon and the Russian Direct Investment Fund (RDIF), disclosed some of its financial results for the first time, showing total gross merchandise volume (GMV) of RUB229bn ($3bn) for fiscal year ending March 31, 2021 versus RUB210bn for the previous year.

As followed by bne IntelliNews, in 2020 Mail.ru with MegaFon and RDIF Mail.ru closed a major deal on AliExpress (AER) ecommerce JV, in which Mail.ru holds a 15% stake. 

AER operates a cross-border marketplace, and the JV is also developing a local marketplace business. The GMV (excluding services) of AER’s local business, which fully launched in October 2019, jumped by 151% year on year to RUB54.9bn. This makes the share of its local business 24% of the total versus 10% at the time of the lunch.

In 2021 AER plans to rapidly increase the GMV and assortment of local sellers, as well as enhance its logistics capacity, improve its customer experience and update its web version, mobile app and loyalty programme.

Notably, an IPO for AER is possible if such a decision is made by the JV’s shareholders, but no plans or specific dates have been set. AER is also sticking to its previous plan of achieving $10bn in GMV by 2023, according to Reuters. The company also aims to invest over $150mn in its own logistics infrastructure in Russia within two or three years, according Interfax citing the management.

Sova Capital estimated that AER’s total GMV figure implies that the JV accounted for 8.5% of Russia’s total e-commerce market. This puts AER behind Russia’s largest domestic e-retailer Wildberries (GMV of RUB437.2bn for 2020) but slightly ahead of Ozon, which delivered a GMV of RUB197.4bn for the same period.

The analysts also note that AER’s local business looks comparable in size to Yandex.Market, which generated an estimated RUB46bn in GMV for 2020. However, Sova acknowledges that the methodologies of how the companies calculate their GMVs could differ. 

For now, Sova Capital sees AER’s release as neutral for Mail.ru, seeing the pace of the expansion of AER’s local business as "quite impressive given that it launched just over a year ago." 

The analysts note that the strong growth of AER’s local marketplace signals that the competition in the Russian domestic e-commerce space continues to intensify, posing long-term threats to Ozon and Yandex.Market.

Sova maintained a Buy call on Mail.ru Group shares, trading at an estimated 2021 Enterprise Value/EBITDA of 12.0x and Price/Earnings of 23.9x. "Our relative preference for this year is for Yandex [rival internet major], which we think is better prepared for a macroeconomic recovery and post [coronavirus] COVID-19 normalisation," the analysts commented.