FRT — 1Q24 results

Key Highlights

1Q24 sales increased by +4% QoQ / +17% YoY to reach VND 9.0tn. Long Chau Pharmacy remains the key growth driver, with sales of VND5.5tn (+15% QoQ / +69% YoY / 61% of total sales) and +90 new pharmacies opened in 1Q24. By contrast, FPT Shop’s sales declined by -10% QoQ /-21% YoY to reach VND3.6tn in part driven by the closure of 12 low-performing outlets in 1Q24.

Blended gross margin improved by +2.5ppt QoQ / +4.7ppt YoY to reach 20.0% in 1Q24. Long Chau’s gross margin improved by +1.6ppt QoQ / +0.9ppt YoY to reach 25.3% in 1Q24. But surprisingly, FPT Shop’s gross margin also improved by +2.0ppt QoQ / +3.9ppt YoY to reach 13.4% in 1Q24. This illustrates that the addition of new home appliance product lines has delivered positive results.

Group operating margin increased by +2.1ppt QoQ / +0.5ppt YoY to reach 1.4% in 1Q24. This was supported by Long Chau’s operating margin of 4.2% in 1Q24, while FPT Shop continued to record negative margin of -1.0% in 1Q24.

Consolidated after-tax profits reached VND 61bn in 1Q24 (a reversal of 4Q23’s losses of VND 103bn and +28.3x YoY). Long Chau continued to deliver, with earnings of over VND 100bn in 1Q24 (+8.4x QoQ / +63% YoY). Meanwhile, FPT Shop continued to post after-tax losses of VND 51bn (-43% QoQ / -23% YoY).

FRT has fulfilled 24% of our 2024E sales estimate and 22% of our PAT forecast in 1Q24.

Our View

We reiterate BUY on FRT. We upgraded our target price to VND166,800 on April 22, and the market appears to agree –- the stock has soared another 13.5% since then, and the current price implies just +3.6% upside to our target.

Fundamentally, we remain confident in Long Chau’s longer term growth roadmap. Pharmacy retail and vaccination centers are already integrated into our valuation model, but healthcare (e.g., the partnership with IHH) and related services could offer even greater upside for FRT.

Please see the link for more details: FRT – Express note – 1Q24 Results