YANDEX N.V.

Nathaniel Rabin

Value Catalysts Extremely rapid growth of internet use in Russia

will lead to more online advertising Deeply discounted when compared to competitors

at similar development stages Major competitive advantages will keep Google

from penetrating Yandex’s 60% market share, downside already priced in

Company Overview

Largest Russian search engine Generates revenue from text-based and

display advertising on own content, as well as revenue from partner websites

Includes search, news, shopping, maps, video, and email functions for users

~97% of revenue comes from Russia, with additional operations in Belarus, Ukraine, Kazakhstan and Turkey

FeaturesFor Users For Advertisers/businesses

Yandex.Search Yandex.Direct

Yandex Homepage Yandex.Spravochnik

Yandex.News Yandex.Webmaster

Yandex.Market Yandex.Metrica

Yandex.Mail

Yandex.Traffic

Yandex.Browser

Yandex.Drive

Yandex.Music

Source: 10k

Internet Use in Russia 44.3 million daily internet users in 2011 (increase of 22% from

2010) ~60 million monthly internet users (51%) of adult population Monthly internet users projected to rise to 71% by end of 2014 Internet use concentrated in “European” Russia, municipal areas,

but spreading outward Online shopping volume increased 30% from 2010-11

Sources: Moscow News article,Public Opinion Foundation report

Recent Developments

Yandex.browser Mobile app store for Android devices Partnership with AAPL Acquisition of SPB Software

Market share strength Decline in share price mostly as a result of market share decrease

from 65%(IPO) to 60.4% (current) Higher share of Chrome searches than Google Yandex has been able to retain large market share because of

understanding of the nuances of Russian language and alphabet Yandex code tracks IP address, uses local dialect to help with

search Yandex’s advantage over Google will only increase as internet use

spreads to more remote parts of Russia Internet use growing at such a fast rate that a decline in market

share to 50-55% would not hurt Yandex too much

Quick Stats- Share Price: $24.60- Market Cap:$8,030.2mm- Total Enterprise Value: $7,661.6mm- LTM P/E: 37.8x- Forward P/E: 30.4x- EV/EBITDA: 23.4x

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NasdaqGS:YNDX - Share Pricing

NasdaqGS:YNDX - Share Pricing

Source: Capital IQ

Q2 Results Revenues of $207.2mm (+50% Y/Y) EBIT of $68.4mm (+63% Y/Y) Net Income of $60.4mm (+76% Y/Y) 60.4% share of Russian search market 46% of Chrome searches (more than Google) Total search queries up 30% Y/Y Number of advertisers: >193,00 (+8% from Q1) Q2 revenue breakdown:

72% text-based advertisements, Yandex content 17% text-based advertisements, partner websites 9% display advertisements 2% online payment commissions

Source: 8k

Financials LTM revenue: $748.3mm

Y/Y rev. growth: 32.9%

LTM EBITDA: $327.2mm Y/Y EBITDA growth: 28.7% EBITDA margin: 43.7%

LTM Net Income: $217.9mm Y/Y income growth: 43.3% Net margin: 29.1%

- Total Cash and ST investments: $367.8mm- Total debt: $0.0

Source: Capital IQ

Margin ComparisonGross Margin

EBITDA Margin

EBIT Margin

Net Margin

FB 74.0% 24.2% 13.8% 13.3%

BIDU 79.5% 57.3% 51.3% 46.8%

GOOG 63.2% 35.8% 30.8% 25.7%

LNKD 85.9% 12.6% 5.4% 1.8%

MAIL 75.5% 44.7% 29.4% 128.0%

EBAY 69.9% 28.9% 20.3% 28.7%

YNDX 75.1% 43.7% 33.7% 29.1%

Source: Capital IQ

YNDX vs. GOOG vs. BIDU historical trading multiples Ignore current multiple comparisons; YNDX is a growth play and

trades at such. However, YNDX is still fundamentally undervalued when compared to its two closest peers at stages of development similar to where YNDX is now.

YNDX (Current)

BIDU (2009) GOOG (2004)

EV/Rev 10.24 18.02x 16.05x

EV/EBITDA 23.42x 41.92x 59.99x

P/E 37.85x 58.51x 186.64x

Source: Capital IQ

Bonus Catalysts – Huge Upside

Proprietary browser Safari mobile default browser? Expansion into other markets (Turkey) Growing use of smartphones in Russia

Risk Factors Significant loss of market share to Google European economic downturn could lead to

decrease in consumption, advertising spending Political/legal risk

“Businesses in Russia, especially high-profile companies, may be subject to aggressive application of contradictory or ambiguous laws or regulations, or to politically motivated actions, which could materially adversely affect our business, financial condition, and results of operations.”

Conclusion

Long YNDX because:Market share will not shrink much further, due to

Yandex’s superior code and understanding of Russian, downside already priced in

“Next Google” unlikely, “next Baidu” far more realistic, still represents huge upside – trading at a lower multiple than Baidu was at similar stage

Online advertising spending in Russia will catch up to exploding internet use

Huge potential upside with recently released products/services