FRT Update – NEUTRAL

FPT DIGITAL RETAIL JSC (FRT VN)

While the FPT Shop chain has yet regained ground, Long Chau sustained solid performance despite investments in vaccination centres, nurturing a positive revision in our EBT projection for 2024 by 53% compared to the latest update. Moving target price to the end of 2025 at VND193,900/share. Rating NEUTRAL.  

FRT announced net revenue of VND9,240bn (+28.9% YoY) and EBT of VND72bn (versus a loss YoY) in 2Q2024. On a cumulative basis, net revenue rose by 22.5% YoY to VND18,281bn and EBT achieved VND161bn (versus a loss of VND198bn in 1H2023).

The FPT Shop chain, bringing in 37% of FRT’s sales, made a loss of VND113bn on a slide of 14.7% YoY in revenue in 1H2024 (including an improvement in 2Q).  A large number of stores (113) was closed in 1H2024 in order to heighten efficiency.  

The Long Chau chain, which now comprises pharmacies and vaccination centers, enlarged its contribution to 63% of FRT’s sales. The chain continued to deliver vivid growth of 66.9% YoY in sales, bolstered by robust network expansion, and 128% YoY in EBT in 1H2024, better than our projection. The vaccination business entered the expansion phase from early 2024 despite negligible contribution in the first year. FPT Long Chau Pharma JSC is still working on the private placement of 10% stake at maximum this year to finance expansion of vaccination centers and healthcare services.  Details have yet been released.

The company’s gross margin widened to 19.8% in 1H2024 (1H2023: 15.2%), fueled by advances in both FPT Shop and Long Chau. Meanwhile, the SG&A expenses to net revenue ratio inflated to 18.4% (1H2023: 15.6%), mostly due to expansion of LC. 

Inventories fell by 7.6% YTD; in which, FPT Shop’s inventories shrank by 30.8% YTD (including a decrease in the number of stores and inventories per store). The net debt to equity ratio improved albeit still high, from 372% at YE2023 to 253% at the end of 1H2024.

We project that the company may generate VND39,013bn of net revenue (+22.5% YoY) and EBT of VND354bn in 2024 (vs. a loss of VND294bn in 2023), up by 1.5% in terms of revenue and 53% in terms of EBT compared to the prior update. The respective growth is projected at 18.3% YoY and 64.2% YoY for 2025. Our target price for FRT by the end of 2025 is VND193,900/shr, equivalent to a total return of 8.5%.

View details in the attachment below.