MWG Update – BUY

MOBILE WORLD INVESTMENT CORP (MWG VN)

Although earnings still suffered, the company reported better results in terms of revenue. This encourages us to expect that the company may improve its performance gradually towards the end of the year and return to growth in 2024. Moving target price to VND56,944/shr for 2024. Recommend BUY.

For 6M2023 results, MWG reported a plummet in both net revenue and EAT by 20.1% and 98.5% y/y, to VND56,571bn and VND38.7bn, respectively, driven by TGDD and DMX’s dim performance. However, for 8M2023, the decline in cumulative revenue was slowed down, reaching VND76,455bn (-17.2% y/y). Earnings were not disclosed.

TGDD and DMX chains together contributed to 73.5% of MWG’s sales witnessed a slump of 27% y/y in revenue in 6M2023 (and 24.7% y/y in 8M2023) due to the weak consumer spending for ICT products and durable goods. 

Meanwhile, BHX which contributed 24.2% of MWG’s sales reported revenue growth of 6.7% y/y in 6M2023 (and 10% y/y in 8M2023) thanks to increasing revenue per store. 

An Khang which contributed very modest to MWG’s sales (c.2% in 2023-2024) continued to focus on fostering revenue per store and optimizing operations to enhance business efficiency, whereas expansion of the store network is not a priority.

The market is closely watching the private placement story of BHX. Currently, there is no official information about this transaction, however, if successful, MWG will primarily gain benefit in terms of capital for expansion of the chain and find out an actual valuation for BHX from investors, which may be an initial base for potential transactions after that.

In sum, our projections for MWG’s net revenue and EAT are VND118,755bn (-11% y/y) and VND525bn (-87.2% y/y) in 2023, which are almost similar to our previous forecast in terms of revenue but 60% lower than our previous forecast in terms of EAT. The respective growth is projected at 15.8% and 722%, to VND137,535bn and VND4,315bn respectively, in 2024, 10% and 30% lower than our previous projections due to a downward revision in TGDD and DMX’s gross margin in light of tougher price competition. Our target price for MWG by the end of 2024 is VND56,944/share, equivalent to a total return of 20.8%.