MWG — Express note — Aug results

Key Highlights

Aug revenues increased by +5% MoM / +15% YoY to reach VND11.4tn. ICT&CE retail sales were solid (+6% MoM / +9% YoY) in Aug at VND 7.5tn. Improved back-to-school demand for laptops/notebooks was a key driver, and we believe the upcoming 2G/3G shutdown at end-Sept has also boosted demand for 4G smartphone upgrades.

BHX recorded sales of VND 3.7tn (+4% MoM/+26% YoY) in Aug. YoY growth has slowed in July-Aug compared to the previous months as sales per store reached what management sees as the optimal level of VND2.1bn in Jul and Aug. BHX posted average YoY growth of c.26% in Jul-Aug, much lower than the Jan-Jun growth of c.42% YoY. BHX opened another 17 outlets in Aug, bringing its network to 1,721 grocery stores (+23 stores YTD).

Sales from other retail chains (i.e., An Khang Pharmacy and Ava Kids) declined by -24% MoM but increased by +34% YoY to reach VND 232bn in Aug. The MoM decline was likely caused by the aggressive closure of another 61 pharmacies in Aug and one mom-and-baby shop. This leaves MWG’s store network at 326 pharmacies (-201 outlets YTD) and 63 Ava Kids shops (-1 outlet YTD) by the end of Aug. Meanwhile, Era Blue – the company’s 45%-owned CE retail chain in Indonesia – opened 8 new outlets in Aug to reach 71 outlets (+33 outlets YTD).

8M24 sales increased by +15% YoY to reach VND 88tn. BHX is clearly the key driver of consolidated sales growth, with segment revenue reaching VND26.7tn in 8M24 (+38% YoY). However, DMX & TGDD also posted positive sales growth in 8M24 (+7% YoY to reach VND 58.9tn) despite the closure of 255 DMX outlets and 135 TGDD outlets YoY.

Our View

MWG has now exceeded our target price. MWG’s share price has increased by +53% since our initiation in January and is trading well above our target price, which is now under review. The valuation has reached 22.9x 2024E PE, which is around one standard deviations above its 3-year historical mean.

MWG’s Sep sales are likely to be affected by Typhoon Yagi and widespread flooding in the Northen provinces. Approximately 25% (739) of MWG’s ICT&CE retail outlets are located in the 20 typhoon-affected Northern provinces. However, MWG’s CEO indicates that somewhere between 3-5% of stores were impacted by the natural disaster.

But grocery business is primarily in the Southern and Central regions of Vietnam, which were not directly hit by the typhoon. MWG has restarted BHX’s store expansion, but guidance for another 100 store openings this year may be a challenge as the company must strike a balance between profitability and expansion, in our view.

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