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MWG – On track with a strong 1Q21 growth – Earnings update

Company Note 05/05/2021    170

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  • 1Q21’s MWG top- and bottom-line recorded VND30,828bn (+5.0% yoy) and VND1,338bn (+18.3% yoy), in line with our expectation.
  • MWG may launch “selling to retailers” form, which turn MWG into a wholesaler in mobile phone and CE market.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND139,400

N/A

1.03%

N/A

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1Q21’s results in line with our estimates

  • Bach Hoa Xanh (BHX) revenue grew robustly 32.5% yoy thanks to 52.6% yoy expansion in BHX stores number to 1.767 at the end of Mar-21.
  • Revenue of mobile phone (TGDD) and consumer electronic (DMX) stayed flat in 1Q21 due to low demand of consumer electronic products, which was hit by Covid-19 in Jan-Feb 21.
  • Consequently, 1Q21 revenue grew modestly 5.0% yoy, fulfilling 23% our full year forecast. 1Q21 blended gross margin expanded by 1.8 pts % yoy to 22.8% as gross margin of BHX improved 4 pts % yoy to 25%.
  • 1Q21 net financial income recorded VND135bn (vs. net loss of VND53bn in 1Q20) thanks to widening cash & equivalent balance (+109% yoy)
  • As the results, 1Q21 net profit grew 18.2% yoy to VND1338bn, fulfilling 25% of our FY21F projection, in line with our expectation.
  • In 1Q21, 410 DMX super mini stores were launched, which contributed VND1,300bn, or 7.8% to DMX chain’s revenue.
  • MWG had 75 An Khang drug stores in operation by the end of Mar-21, (+7 stores vs end-20), of which 60 were integrated in large-scale BHX stores to take advantage of customers’ footfall to increase retail sales at the stores.

A new form of B2B promises to boost mobile phone and CE sales volume
At the end of Apr-21, MWG sent a proposal to manufacturers and distributors about a new form of B2B. According to this, MWG will become a wholesaler of importing mobile and CE products. We think the B2B business will help MWG to gain market share and power of bargaining, which can increase gross margin of retail sales of TGDD and DMX chain in the next period.

In search of growth driver for the futures
At the end of Apr-21, MWG has deployed 2 bicycle retail stores in District 2 and 9, Ho Chi Minh City with the intention of tapping in bicycle retail segment in new urban area. We believe the continuous research and testing of new retail models of new products is one of the key factors for MWG to grow.

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