MWG — 2Q24 results

2Q24 revenues increased by +8% QoQ / +16% YoY to reach VND 34.1tn. BHX remained the key sales growth driver, recording sales of VND 10.3tn (+13% QoQ / +42% YoY) in 2Q24.

Remarkably, BHX appears to have posted a VND7bn profit in 2Q24. We note that tax loss carryforwards at BHX were VND 105bn at end-1Q24, and this figure reduced to VND 98bn (-7% QoQ / -85% YoY) by the end of 2Q24.

Total ICT&CE retail sales posted modest growth of +8% QoQ / +9% YoY in 2Q24 to reach VND 23.0tn, driven by DMX’s sales growth (+12% QoQ/+9% YoY in 2Q24). The weather-related surge in demand for air conditioners in Apr and May was followed by increased sales of TVs in June.

Sales from other retail chains (i.e., An Khang Pharmacy and Ava Kids) plummeted -11% sequentially and -20% YoY to reach VND 816bn in 2Q24. This decline was probably caused by the aggressive closure of 45 pharmacies in June. MWG thus runs a network of 481 pharmacies (-45 pharmacies YTD) and 64 mom-and-baby shops (flat YTD) as of the end of Jun.

• 2Q24 PATMI jumped by +66x YoY… from the very low 2Q23 base to reach VND 1.2tn.
• …on improved margins… when gross margin was 21.4% (+0.1ppt QoQ / +2.9ppt YoY) and net margin was 3.4% (+0.6% QoQ / +3.4ppt YoY).
• … driven by improved operating efficiency. MWG reviewed and closed a total of 116 underperforming outlets (25 ICT outlets and 91 CE outlets) while still achieving revenue growth and higher margins in 2Q24.

6M24 total sales growth grew by +16% YoY (vs. the -20% YoY decline in 6M23) to reach VND 65.6tn. Thus, 6M24 PATMI was VND 2.1tn (+54x YoY).

MWG has achieved 52% of our full-year revenue forecast and its guidance for 2024E in the first six months of the year. MWG has also fulfilled 60% of our full-year PAT forecast and 86% of guidance for 2024E.

Our View

The strong YTD results confirm our view that MWG is on track to exceed guidance and our own forecasts for 2024E earnings. We expect MWG’s solid operational momentum to continue in the context of BHX’s continued recovery. Also, the beleaguered ICT segment should benefit from three tailwinds in 2H24: (1) back-to-school purchases, (2) 4G smartphone upgrades, and (3) the growing appetite for advanced AI devices.

MWG has now exceeded our target price. MWG’s share price has increased by +42% since our initiation in January. At this point, the stock’s valuation has reached 21.7x 2024E PE, which is two standard deviations above its 5-year historical mean. MWG is clearly not immune to a market correction, and prudent investors might consider waiting for a pullback to add to positions.

Please see the link for more details: MWG — Express note — 2Q24 results