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MWG Update – OUTPERFORM
13/11/2024 - 4:46:47 CHMOBILE WORLD INVESTMENT CORP (MWG VN)
The company’s earnings continued to be fostered by a rebound in TGDD & DMX’s performance, enlargement of BHX’s net profit, refining efficiency by streamlining the store network and no loss from the joint venture Era Blue in 3Q2024. Still, we revise down our EBT projection by 5% for 2024-2025 to reflect incremental costs for store closure and a bit lower-than-expected gross margin. Our target price is revised down by 3% to VND70,000/share by the end of 2025, translating to a total return of 14.8%. Rating OUTPERFORM.
MWG reinforced restoration of its business performance from gloomy days in 2023 by posting net revenue and EBT growth of 12.7% and 6 times YoY, respectively, in 3Q2024. 9M2024 net revenue achieved VND99,767bn (+14.9% YoY) and EBT was VND3,790bn (+8 times YoY). The preliminary revenue growth was 13.6% YoY in 10M2024.
TGDD & DMX, together responsible for 67% of MWG’s top line, generated 8.6% YoY revenue growth irrespective of a fall (of 6.6% YTD and 11.5% YoY) in the number of stores in 9M2024 to eliminate underperforming ones. The result was almost flat YoY in Oct 2024.
BHX was in the limelight for elevating net profit to VND90bn in 3Q2024 following the first profit in 2Q. Making up 30% of MWG’s sales, the chain upheld vivid growth of 26.9% YoY in 3Q and 36.2% YoY in 9M2024 thanks to an uptrend in monthly revenue per store since early 2023. The preliminary revenue growth was 18% YoY in Oct, lower than the prior months because of the low base effect in revenue per store fading out.
An Khang, whose contribution to MWG’s sales remains modest (c.2% in 2024-2025 forecast), sustained a priority on boosting revenue per store and optimizing operations. The chain closed 201 stores in 9M2024 in order to heighten efficiency.
The jump in 9M2024 EBT came as a result of improvements in gross margin, the SG&A expenses to net revenue ratio and financial profit (+74% YoY), regardless of one-off net costs for store closure. The gross margin widened to 21.0% in 9M2024 (9M2023: 18.8%), while the SG&A expenses to net revenue ratio enhanced to 17.4% in 9M2024 (9M2023: 18.7%) in view of a recovery in sales.
We expect that the company may generate VND135,316bn of net revenue (+14.4% YoY) and EBT of VND5,011bn in 2024 (+7 times YoY), 5% lower than the prior update. The respective growth is projected at 7.3% YoY and 20% YoY for 2025. Our target price for MWG by the end of 2025 is VND70,000/share (~a total return of 14.8%).
View details in the attachment below.
