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DGW - Many little makes a mickle

Q1-FY25: New business segments are gradually improving profitability
• DGW’s Q1-2025 results were in line with analyst expectations: net revenue reached VND 5,519 bn (+10.7% YoY), NPAT-MI at VND 106 bn (+14.6% YoY), driven by market share gains in laptops & tablets offsetting mobile phone declines (mainly Apple), along with continued expansion in office equipment & home appliances (notably adding Philips to its portfolio).
• These two higher-margin segments helped lift EBIT margin by 103bps to 3.4%. However, their impact on net margin was offset by a one-off financial expense of VND 76 bn, keeping net margin flat YoY.
FY25 Outlook: Despite gradual gains from expanding distribution to new segments, earnings upside remains is limited by persistently high financial expenses
• Q2-2025’s results are projected to lack significant breakthroughs, burdened by elevated financial costs, with NPAT-MI at VND 112 bn (+5.4% QoQ, +25.4% YoY). Key growth drivers mirroring Q1 include Laptops & Tablets gaining momentum ahead of the back-to-school season, Home Appliance with Philips and Xiaomi TVs, and a recovery in Xiaomi phone market share post the peak “iPhone” season.
• In 2025, DGW faces downside risk from potential market share loss in its long-standing Apple distribution segment. However, strong ties with Xiaomi and growing laptop & tablet share—driven by deeper penetration into the “gaming” niche—are expected to support stable ICT performance, similar to 2024.
• Focus shifts to new segments—office equipment and home appliances—which continue to deliver both revenue growth and margin uplift. PBT & interest margin rose to 3.2% (+80bps YoY), but this was offset by a one-off spike in financial expenses, keeping net margin around 1.9–2.0%, in line with the past two years.
• We forecast net revenue at VND 24,965 bn (+14.0% YoY), with NPAT/EPS reaching VND 512 bn (+17.6% YoY) and VND 2,378 per share.
Outlook & Recommendation
DGW is actively reducing its reliance on core segments—ICT—by diversifying its business model both vertically (enhancing product offerings with trends like IoT, software, and iCloud) and horizontally (penetrating higher-margin segments such as Consumer Goods since 2017 and Home Appliance since 2022).
We value DGW using a blended approach of short-term P/E and long-term DCF, weighted 60:40. Our 12-month target price is VND 39,000/share (including VND 500 cash dividend), implying 2025F P/E of 16.2x. Based on the closing price as of 11 June, 2025, we assign a NEUTRAL rating for DGW.
We note that DGW’s earnings are expected to show a more favorable inflection point in 2026, as one-off financial expenses phase out. This will better reflect net margin expansion from new segments and suggests a more attractive medium-term investment opportunity.