MWG Update – BUY

MOBILE WORLD INVESTMENT CORP (MWG VN)

Although we revise down our projections to reflect the company’s gloomy results in 1Q23 in light of weak consumer spending, we maintain a BUY recommendation on the stock given better signs in April and expectations that the performance may improve towards the end of this year. 

MWG’s net revenue and EAT plummeted by 25.7% and 98.5% YoY, to VND27,106bn and VND21.3bn, respectively, in 1Q23. The plunge in EAT was mainly attributed to a substantial squeeze in gross margin (19.2% in 1Q23 vs. 22.3% in 1Q22), mostly due to TGDD and DMX’s promotion programs to boost sales. A higher SG&A expenses on net revenue ratio (18.8% in 1Q23 vs 17.2% in 1Q22) and a 57% decline in financial profit were also responsible forthe results.

TGDD and DMX chains (including Topzone and DMS) witnessed a slump of c.33% YoY in revenue in 1Q23, underperforming our projections given that revenue per store by month was lower than thatin the last months of 2022. Although weakening consumer spending had been expected, its severity even intensified in the early months of the year, which are typically the chains’ peak season. Same-store sales growth of both chains in the aggregate was reported at negative 37%. Most of major categories (e.g mobile phones, laptops, electronics, white goods, small appliances, etc.) experienced negative YoY sales growth in the quarter.