MWG — Express note — Apr 2024

Key Highlights

April sales grew by +18.0% MoM / +17.7% YoY to reach VND 11.6tn.

4M24 sales have thus expanded by +16.8% YoY to reach VND43tn with all business segments posting positive growth.

BHX is the key growth driver with 4M24 sales up by +43.1% YoY to reach VND12.4tn (29% of consolidated revenues). This is a very solid result, especially considering that BHX has shuttered a net 410 stores since starting its restructuring in 2Q22. This includes the closure of 30 stores in 2023 and 12 outlets in the past 12 months. However, the number of BHX stores was flat MoM in April at 1,696 outlets.

Average monthly sales per store expanded by +44% YoY to VND 1.8bn in 4M24. Management expects sales per store to continue to improve going forward, with the company’s target set at VND 2.0bn in the future.

DMX sales were up +11.0% YoY in 4M24 to reach VND 20.5tn underpinned by rising purchases of air conditioning units to fight the heat.

Even TGDD’s sales ticked higher –- albeit by just +0.7% YoY — to reach VND 8.9tn in 4M24. As such, total sales of the ICT&CE retail segment improved by +7.7% YoY in 4M24.

Sales at the other retail chains (i.e., Ava Kids and An Khang Pharmacy) jumped by +41.1% YoY in 4M23. This is very impressive growth, but clients should bear in mind that these two chains account for just c.3% of MWG’s 4M24 total sales.

Our View

The potential extension of the VAT tax reduction policy to end-2024 is noteworthy for consumers. However, we don’t consider it to be a substantial catalyst for MWG because electronics retailers do not currently benefit from this policy. A possible extension of the reduced VAT to include ICT/CE product categories -– as proposed by the Vietnam Confederation of Commerce and Industry (VCCI) — would thus be positive news, in our view.

We continue to believe that MWG is on track to meet or exceed its guidance as well as our forecasts for 2024E based on the strong YTD results and our expectation for this solid recovery momentum to continue going forward.

We have a BUY recommendation on MWG, but the stock has now exceeded our target price. MWG is trading at a 2024E PE ratio of 22.7x, which is two standard deviations above its 5-year historical mean. The stock would not be immune to a healthy market correction, and we suggest waiting for such weakness to add to positions.  

Risk: Increased borrowing costs might reduce ICT/CE demand further. According to MWG, consumer finance-driven purchases represent c.30% of total sales, which works out to approximately 43% of total ICT/CE sales.

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