INVESTMENT THESIS
Mobile World Investment Corporation (HSX: MWG) is the leading retail company in Vietnam, including the chains thegioididong.com (TGDĐ), Điện Máy Xanh (ĐMX), Bách Hoá Xanh (BHX), An Khang Pharmacy, and AVA KIDs. With a population of nearly 100 million people, Vietnam is a potential retail market for MWG thanks to its network of 5,541 stores across the country.
Business results in Q1/2024 recovered positively. In 2024, MWG plans to achieve revenue to reach 125,000 billion VND (+6% compared to the actual performance in 2023) and profit after tax to reach 2,400 billion VND (+13% compared to the actual performance in 2023). In the first quarter of 2024, MWG recorded a net revenue of 31,486 billion VND (+16.2% of sales, completing 25.2% of the year’s plan) and a profit after tax of 903 billion VND (+42x yoy; completed 37.6% of the year's plan). The gross profit margin in Q1/2024 also improved to 21.3%, compared to 19.2% in the same period last year thanks to the high proportion of the refrigeration sector, which has a higher gross profit margin.
The product categories of the TGDĐ and ĐMX chains mostly recorded growth in the first quarter. The growth driver in Q1/2024 mainly comes from the electronics category (in which air conditioner products recorded nearly 50% y-o-y growth) due to record hot weather. Other categories that also recorded growth include phones, tablets, watches, and household appliances. On the other hand, the electronics and laptop categories recorded negative growth during the period.
BHX is expected to generate a profit this year. In Q1/2024, revenue per store reached 1.8 billion VND (+44% yoy) with gross profit margin maintained at 24-25% thanks to the high proportion of fresh products. As a result, the EBITDA margin tripled year-on-year with 97% of stores having positive EBITDA. According to the management, the BHX chain started to become profitable in April with an average revenue of 1.9 billion VND per store. This business chain is expected to go public when it reaches a profit of 1,000 billion VND.
Prospects:
•The TGDĐ and ĐMX chains are expected to maintain recovery momentum and return to growth thanks to economic prosperity and effective restructuring strategies.
•The BHX chain will generate positive profits in 2024-2025, supporting growth in subsequent years. The IPO and listing of BHX when this chain achieves its profit target will bring substantial cash flow to MWG in the coming years.
•The proposal to continue reducing VAT by 2% for the last 6 months of the year, if approved, will be a short-term price support driver.
Risk:
•Economic recovery slower than expected, leading to sustained low purchasing power.
RECOMMENDATIONS
OUTPERFORM recommendation with 1-year target price of 68,500 VND/share and potential price increase of 14.9% based on relative valuation method. Currently, MWG share price is trading at LTM P/E ratio of 83.8x and Forward P/E ratio of 23.8x.
Investors can see the full report below:
