Retail sector – Gather steam in “new normal”

• After being hurt by social distancing in 3Q21, Vietnam retail sales of goods have recovered rapidly since Oct 21.
• We expect big retailers will ride on the recovery of domestic consumption and change in shopping behavior from offline to online.
• Our retail stock picks: MWG, PNJ, and VRE.

Vietnam retail sales of goods have recovered rapidly since Oct 21

After being hurt by social distancing in 3Q21, Vietnam retail sales of goods have recovered rapidly by increasing 12.5% mom in Oct 21 and 15.2% mom in Nov 21, respectively. Oct – Nov 21 sales of listed companies also posted a strong growth like revenue of MWG’s TGDD&DMX chain (Mobile phone and consumer electronics) increased by 53% / 36% yoy and PNJ’s revenue increased by 13.8% / 18.9% yoy in Oct 21 / Nov 21, showing the positive results in the new normal.

We do not expect wide social distancing in 2022F

Vietnam has entered a “new normal” with “Living with pandemic” strategy since Sep 21. With high vaccinated rate and the terrible impact of supply chain disruption in 3Q21, we believe retailers and distributors will no longer bear wide-range social distancing from 4Q21 and beyond.

Big retailers will gain more market share in “new normal”

According to Ministry of Planning and Investment, more than 33.000 enterprises of wholesale, retail and repair industries have filed for closure in 11M21. We believe that the majority of these companies are small-scale companies, which be hurt by social distancing more than large-scale companies. Therefore, we expect large size retailers, especially listed retailers, to have a quicker recovery than others and gain a strong growth in 2022F.

We see three trends to accelerate revenue growth for retail industry

Following the recovery of retailers, we see three trends to accelerate growth for retail industry, includes 1) Omni channel and online channel to be a key driver for retail company, 2) Growing demand for authorized high-end smartphone and work-from-home products will continue and 3) modern grocery chain benefits from the post-pandemic shift in consumption toward modern trade. Therefore, companies that are operating and applying strategies to follow the above trends will achieve good growth in the coming period.

Stock picks: We prefer MWG, PNJ, and VRE

We prefer stocks that 1) have a leading position in their business, 2) benefit greatly from above trends to accelerate their growth, and 3) have attractive valuations. Therefore, our stock picks for retail sector are MWG, PNJ and VRE. Main downside risk include: another wide-range social distancing in Vietnam.

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