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FRT - Long Chau rides the wave in Vietnam’s fragmented pharmacy

Q2-FY25: FRT maintained growth momentum thanks to Long Chau accelerating store opening plan and benefiting from a tightening market. On the other hand, FPT Shop managed to reduce its losses
• In Q2-FY25, FRT recorded a positive performance with net revenue/NPAT-MI reaching VND 11,390.3 bn (-2.4% QoQ, +23.3% YoY) and VND 118.7 bn (-29.4% QoQ, +343.7% YoY), respectively. This was led by Long Chau (70% of revenue, 123% in total NPAT-MI) thanks to favorable new openings (70% QoQ), the shifting consumer habit trend from GT to MT channels and benefiting from the pharmaceutical origin tightens, e-invoice process standadization. Thereby, Long Chau's revenue/store/month reached VND 1.17 bn (+3% YoY) in H1/2025, but recorded a slight decrease of 3% QoQ due to the rapid opening. Cost management efficiency continued to improve when the profit margin reached 1% (+0.7 pps YoY) thanks to a reduction in SG&A costs/revenue (-0.3 pps YoY) despite the increase in stores number of pharmacies/VC by 248 and 52, respectively, compared to the end of 2024.
• On the other hand, FPT Shop was a grey segment of FRT in unfavorable seasonality and continued to record VND -27 billion (-47.4% QoQ, +55.8% YoY) while major competitors such as TGDD&DMX are growing well. Additionally, after restructuring in 2024 (closing 124 stores in 2024 and 9 stores in H1/2025), FPT Shop had to implement numerous promotional activities to attract customers and regain the ICT market share by increasing discount rate (Q2 gross margin reached 12.6%, -1.14% YoY) and increasing SG&A/revenue (+0.5 pps QoQ) in return for improved revenue/store/month reached VND 1.83 billion (+5.8% YoY) in Q2.
Q3 outlook: Expect a brighter picture with market advantages for modern retail chains and the ICT new product launch season in the second half of the year
• In H2/2025, we expect Long Chau to continue to be a “pillar” of FRT by accelerating the expansion to get additional market share in rural areas (reaching >21% of the pharmaceutical retail market share, +5 pps YoY, especially in the context of tightening market of pharmaceuticals origin, with a total of 400 new stores.
• The "revival” of FPT Shop is gradually taking shape as it returns to profitability by further optimizing its operating system. Some strategies will continue to be maintained: Cooperation with third-party payment service providers to offer discounts on selling prices, expansion to CE items (higher gross margin than ICT items). In addition, Apple's new product launch season is also predicted to drive demand for ICT in upcoming period.
• Thereby, we forecast Q3/2025 results with net revenue and net profit of VND 12,828 bn (+23.6 YoY) and VND 274 bn (+75.5% YoY), respectively: Long Chau’s expansion continues and maintains revenue/store growth rate at 3% YoY; FPT Shop gradually stabilized the operation after restructuring and seasonality is relatively supportive for the second half of the year.
Valuation and Recommendation
We believe that Long Chau continues to underpin FRT’s performance over the coming year, driven by a new‑store rollout and higher revenue per store (3-5%). This will offset the seasonal trough in FPT Shop’s ICT segment when the chain focuses on operational optimization throughout 2025.
Using the 5-year FCFF method for long-term valuation and the SoTP method for the short- and mid- term, we maintain our OBSERVE recommendation for FRT and provide additional valuation information under different risk scenarios for investor reference.