DGW: 2Q Results — Surging 2Q19 sales
24/07/2019 - 16:54
Target price: 30,000
- The smartphone segment remains the largest revenue driver, and 2Q19 sales were up 49% YoY.
- Laptop & tablet sales surprised on the upside, increasing by 46% YoY in 2Q.
- Office equipment continues to record consistently high growth.
DGW’s smartphone segment got back on track with +49% YoY sales growth in 2Q19 vs just +5% YoY growth in 1Q19. Nokia launched a new model (Nokia 3.2) in May and Xiaomi’s latest models (Redmi Note 7 and Mi 9, launched in 1Q19) have started to bear fruit. The recovery in smartphone sales in 2Q19, which bolsters our confidence.
Laptops & tablets surprised on the upside, increasing by 46% YoY in 2Q19. This was considerably higher than 1Q19 segment growth of only 1% YoY. Management attributes the rebound in growth to their strategy of negotiating with brands for distribution of their newest and, sometimes, exclusive models. Also, increased ASPs (+10% YoY) drove an (undisclosed) increase in laptop & tablet segment profit margin in 2Q19.
Office equipment momentum is consistently increasing with growth of 24% YoY in 2Q19 vs 19% YoY in 1Q19). The server, PC, & storage device segment (+18% YoY) was the main contributor, accounting for 54% of the increased sales. IoT devices (+52% YoY, contributing 25% of the increased sales) ranked second. Management expresses a high level of confidence in the OE category and believes it could see CAGR of 25% during 2018-23, backed up by booming new FDI business establishment and DGW’s solid market position.
Consumer goods recorded triple-digit growth rate of 214% YoY in 2Q19 (albeit off a small base). Management attributes this partly to nutritious products from Nestle. DGW disclosed that Nestle plans to launch new nutritious products in upcoming months, and management believes the segment sales will double every year during 2018-23.
Investment implications: Reiterate Buy. Smartphone sales YTD have lagged our forecasts by c. 14%, but the rebound in 2Q supports our confidence. By contrast, office equipment beat our estimates by c. 13%. Laptops & tablets were in line, and although consumer goods were strong, this segment is too small to affect our valuation. Overall, DGW’s 1H19 bottom line was in line with our expectation and we thus retain our target price of VND 30,000.
Please access the link for our complete report: DGW 2Q Results
Analyst: Quang Vo, email@example.com