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FRT Update – OUTPERFORM
15/05/2024 - 11:39:12 SAFPT DIGITAL RETAIL JSC (FRT VN)
The company returned to be profitable in 1Q2024 following three consecutive quarters of loss in 2023. While Long Chau kept enhancing its performance, the FPT Shop chain extended its loss, resulting in a down revision in our EBT projection for 2024. However, we revise up our revenue projection to incorporate the vaccination business and move up the EV/Sales ratio from 0.85x to 1.0x, deriving the target price to mid-2025. Rating NEUTRAL at new target price of VND179,400/share.
FRT announced net revenue of VND9,042bn (+16.6% YoY) and EBT of VND89bn (up by 44 times YoY) in 1Q2024, driven by Long Chau’s on-track performance.
The FPT Shop chain, bringing in 40% of FRT’s sales in 1Q2024, has yet seen a rebound in revenue, witnessing a 20.6% YoY slump in 1Q2024, given that a recovery in consumer spending remains vague. The chain made a loss of VND51bn though this was better compared to those in prior quarters.
The Long Chau chain, which now comprises pharmacies and vaccination centers, enlarged its contribution to 60% of FRT’s sales. The chain continued to deliver vivid growth of 68.5% in sales and 106% YoY in EBT in 1Q2024, fostered by robust network expansion. The vaccination business entered the expansion phase from 2024 despite a humble contribution in the first year. FPT Long Chau Pharma JSC plans to implement 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 20.0% in 1Q2024 (1Q2023: 15.3%), driven by advances in both FPT Shop and Long Chau. Meanwhile, the SG&A expenses to net revenue ratio inflated to 18.6% (1Q2023: 14.4%).
Inventories fell by 10.6% compared to that at YE2023; in which, FPT Shop’s inventories shrank by 22%, capturing 41% of the total. The net debt to equity ratio improved albeit still high, from 372% at YE2023 to 285% at the end of 1Q2024.
FRT targets net revenue at VND37,000bn (+17% YoY) and EBT at VND125bn in 2024. We project that the company may generate VND38,410bn of net revenue (+20.6% YoY) and EBT of VND231bn in 2024, up by 3% in terms of revenue but down by 45% in terms of EBT compared to the previous update. Our target price for FRT for the next twelve months is VND179,400/share (~a total return of 10.5%).
