MWG – Looking forward to a less stressful year ahead
- Q3 2023, MWG booked net sales of VND30,288 bn (or USD1,252 mn; +2.8% QoQ; -5.4% YoY). The gross margin recovered by quarter at a modest rate owing to the improvement in TGDD/DMX ‘s gross margin as the pressure from de-stocking ICT/CE inventory was softened. MWG ‘s net margin improved in line with the gross margin trend but remained at the low level. Consequently, Q3 2023 net profit reached VND39 bn (or USD1.6 mn, +129% QoQ; -96% YoY)
- We expect 2023 sales and NPAT-MI to reach VND122,595 bn (or USD5,066 mn, -8.1% YoY) and VND422 bn (or USD17 mn, -89.7% YoY), respectively. The equivalent EPS is VND288. 2023 is a bad luck year for MWG. The high-cost ICT/CE inventory, low demand, and the abnormal costs from BHX restructuring projects drive the net profit to the lowest level since 2013 until present.
- We predict 2024 average sales per store per month of TGDD/DMX and BHX chains will be VND2.1 bn (+4% YoY) and VND1.8 bn (+17% YoY), respectively. Meanwhile, we assume the number of TGDD/DMX and BHX stores in 2024 will be 3,144 and 1,706, respectively. In summary, we forecast 2024 sales and NPAT-MI to be VND132,323 bn (or USD5,468 mn, +7.9% YoY) and VND1,278 bn (or USD53 mn, +203% YoY), respectively. The equivalent EPS stands at VND873.
- Based on the SoTP model, we revise down target price (TP) to VND51,500 from the TP of VND57,600 in Jul-2023. Our new target price is backed by the assumptions of (1) NPAT-MI will grow at a triple-digit rate in 2024, (2) BHX chain has found an effective operating model that will generate a 2023-2027 CAGR in MWG ’s net profit of +70%, and (3) the 12-month expected return is +20.6% compared to the closing price on Dec 21st 2023, we recommend to BUY MWG stock for long-term holding.
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