COMPANY ANALYSIS REPORT
Masan Group (HSX: MSN) is a business specializing in the consumer sector, including FMCG, retail, meat value chain, mining and technology materials. The business owns the retail chains WinCommerce, MCH, MML and MHT. MSN focuses on plans to expand the retail system, high-end products, optimize the supply chain and improve operational efficiency.
INVESTMENT THESIS
- MCH expects positive growth thanks to its strategy of premiumizing products. Despite facing more adverse conditions in international trade, Vietnam's economy is still projected to maintain positive growth in 2025, partly due to government support policies that promote domestic consumption. Along with the trend of the urban middle class choosing high-quality, health-oriented, and convenient products, spending on premium FMCG (fast-moving consumer goods) is expected to rise. With advantages in brand and distribution systems, MCH can effectively tap into these customer segments and increase revenue, as the selling prices of premium products are 0.5 to 1.5 times higher and the estimated gross profit margin is over 10% compared to regular products.
- WCM's business operations have improved and begun recording profits thanks to its strategy of expanding the store network and effective cost management. With a system of 3,828 stores nationwide, WCM is the largest retail chain in Vietnam. This allows WCM to reach a diverse range of customer groups, applying technology in customer communication, inventory management, and distribution, which has yielded positive results in 2024: a 10% revenue growth compared to the previous year, a 30% increase in customer traffic, and a 10.6% EBIT margin per store, surpassing traditional stores by 5%. WCM plans to intensify network development in the coming years, aiming to open an additional 200 stores in Q1 2025 and 400-700 stores throughout 2025, while continuing to leverage WCM's ecosystem to sell products from MML and MCH.
- MML benefits from high pig prices. The strategy of focusing on improving the efficiency of pork production, along with expanding the processed meat segment, has led to more favorable results for MML. Pig prices are expected to remain high in 2025 due to declining supply and new regulations from the Animal Husbandry Law. Although the prices of some feed ingredients (soybeans, corn) are trending slightly upward starting in 2025, the continued high pig prices compared to the same period will help MML further improve its gross profit margin.
- The business performance in 2025 is expected to be positive. We anticipate that net revenue for FY2025 will reach VND 88,490 billion (+6% YoY) and net profit after tax will be VND 5,771 billion (+35% YoY), driven by strong growth in the fresh meat and processed meat segment (MML) and retail (WCM), with EPS at VND 1,785.
2024 BUSINESS UPDATE
- Revenue and net profit after tax reached VND 83,177 billion (+6% YoY) and VND 4,272 billion (+128% YoY), with growth coming from all business segments and investments in associated companies. Notably, the retail segment (WCM) and branded consumer products (MCH) significantly contributed to revenue, accounting for 35% and 39%, respectively. WCM recorded a profit for the first time, thanks to cost control and the development of a new store model, alongside recovering consumer demand. MCH reported an average growth of 10% in revenue from seasonings/convenience foods/beverages/HPC/coffee, with substantial contributions from the premium segment and a 15% increase in exports compared to the previous year.MSR's sale of its tungsten downstream business to Mitsubishi generated USD 134.5 million, helping to reduce debt for MHT and lower financial leverage for MSN.
- Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 19.3% year-over-year, reaching VND 15,921 billion. Net profit attributable to the parent company's shareholders was VND 1,999 billion (+377.5% YoY), achieving 200% of the baseline target set at the annual general meeting.
RECOMMENDATION
OUTPERFORM recommendation with a 1-year target price of VND 70,500/share and an upside potential of 25%.
Valuation
- Using the Sum of the Parts (SOTP) valuation method, with a discount rate of 10%, the discounted equity value is VND 106,632 billion. The fair value per share is VND 70,500.
- Risk: (1) Domestic consumption weaker than expected, (2) Average pig prices lower than anticipated and limited improvement in pork production, (3) Market expansion strategy impacted by concerns over instability in several foreign markets, (4) Declining copper prices amidst escalating global trade tensions.
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