MWG — Express note — 2024 results

MWG slightly outpaced our 2024E sales forecasts by +1.4% but missed our full-year earnings forecast by -5.2% due to our higher-than-forecast SG&A costs and interest expenses for 2024E.

Key Highlights

Total revenues increased (+13.5% YoY) to reach VND 134tn in 2024, driven by 1) grocery retail sales (+30.2% YoY), as expected, and 2) a +7% YoY increase in CE/ICT sales, which we don’t think was anticipated when we initiated on MWG a year ago. Please see the table on the left for a breakdown of sales by segment.

Gross margin improved to 20.5% in 2024, –0.5ppt lower than our 2024E forecast of 21.0%. MWG recorded 2024A gross profit of VND 27.5tn (+22.1% YoY), which is almost in line with our same-year forecast of VND 27.7tn.

EBIT soared +8.4x in 2024 to reach VND4.1tn after last year’s low base of VND436bn. This was 20% lower than our forecast of VND4.8tn, with full-year SG&A costs coming in slightly (2.2%) ahead of our assumption.

2024A PATMI of VND3.7tn (+22x YoY) missed our forecast by 5.1%, partly due to higher-than-expected interest expenses as total borrowings surged by +43% YoY in 2024 to fund working capital requirements. Notably, the 4Q24 current ratio (1.8x) and quick ratio (1.2x) remained solid above MWG’s 10-year historical average levels of 1.6x and 0.7x, respectively.

2025 Guidance: Aggressive on grocery, but conservative on electronics retail  

• BHX: Plans for 200-400 new stores opening in 2025E, focused on Vietnam’s central region. Targeting at least 17% revenue growth.
• TGDD/Topzone & DMX: No store expansion plans for 2025E; continuing to focus on operating efficiency improvements. Targeting at least 4.5% revenue growth in 2025E.
• An Khang Pharmacy: Reaching the break-even point by 2Q25 and gradually expanding thereafter.
• AvaKids: No physical store expansion plans. Focusing on the online channel, which contributed 50% of this chain’s 2024 sales.
• EraBlue: 87 outlets open at end-2024E. MWG plans to have 150 outlets by end-2025E. MWG targets EraBlue to post revenue growth of over 50% in 2025E and to contribute positively to consolidated full-year earnings.

Our View

We reiterate our BUY recommendation, supported by our positive view on MWG’s continued operational turnaround. Management’s expansion plan for BHX is more aggressive than our projections, which suggests potential upside for our fair value estimates. Meanwhile, 2025E earnings growth should be enhanced by continued operational improvements.

Model adjustment — We slightly reduce our target price by -0.7% to VND 76,100 per share, implying a 12-month TSR of 29.6%. This slight cut results from inputting the actual FY2024 figures into our model, with no changes to our 2025E-2030E growth assumptions.

Please see the link for more details: MWG — Express note — 2024 results — edited