29/02/2024 - 14:56
MWG — 4Q23 AM
| Key Highlights MWG continues to view BHX as the key sales growth driver over the next 5 years given its significant growth potential in the context of the relative structural maturity of Vietnam’s ICT&CE retail market. ► BHX operations? SSSG increased by +34% YoY in 4Q23, while gross margin decreased by -3ppt YoY to 24% due to higher contribution of fresh food products (i.e., c.30% of BHX’s total sales in 4Q23). MWG said that the fresh-food focus has helped to improve traffic as evidenced by the +20% YoY increase in the number of bills in 2023. MWG plans to open 100 new grocery outlets in HCMC, where consumer density is high but BHX’s store presence is still low. BHX also plans to reduce its logistics expense / revenue ratio to 3.5% by end-2024 vs. the current level of 4.0-4.5%. ► BHX stake sale? Deal discussions are under way and MWG targets getting it done in 1H24, but otherwise provided no further comment on the details. ► TGDD & DMX? The YoY decline in SSSG eased off toward yearend. 4Q23 SSSG was still down by -5% YoY, but this represents a continued improvement (1Q23: -32% YoY, 2Q23: -22% YoY, 3Q23: -15% YoY). Management’s positive scenario is for discretionary consumption to recover starting from mid-2024E. Also, MWG will continue to restructure and close underperforming stores in 2024E. Catalysts for 2024E: 1) MWG will no longer lead the price war, which should cool down as a result; and 2) an early arrival of Vietnam’s hot season (expected in March) may boost air conditioner sales. ► Online channel? Adopting independent pricing strategies, promotions, and customer services to enhance its competitiveness vs. the major e-commerce platforms. In 2023, online channel revenues reached VND 16.7tn (-11% YoY) or 14.3% of total sales –- just slightly higher than the 14.2% figure of 2022. FY2023 cash dividend and FY2024 ESOP? Not much guidance here, as both policies are being formulated for shareholder consideration at the April AGM. ► Our View ► We retain a cautious take on the electronics retail business… and so does MWG management. We expect the company to continue restructuring and filtering out underperforming stores in 2024E. We also believe that sales per store at TGDD/DMX will increase YoY this year given the low 2023 base. ► … But our assumption for new BHX store opening is more conservative than management’s. This could imply upside for our model if MWG outperforms our expectations, and we would welcome such an event. We reiterate our BUY recommendation and target price of VND 59,300, implying +31% 12-month upside. For details, please see our initiation note of Jan 24, The Hero’s Journey. |
