Outlook for MWG

Increase in net profit

Traffic growth helped income per shop stay at VND2 billion per month (13% year over year) in 4Q24, increasing total revenue to VND 10,779 billion (16% year over year). Additionally, despite the poor demand and the 7% year-over-year decline in TGDD&DMX's shops, revenue increased by 8% year over year, demonstrating the success of the growing market share. The SG&A expense/revenue ratio was 17.5% (-1.3 points per year). Total financial expenditures decreased by 55% year over year as a result of the substantial debt reduction.

The net profit was 8 times greater year over year at VND 847 billion. The net profit for FY2024 was VND 3,722 billion, which was 21 times greater than the previous year. This outcome enabled MWG to surpass its yearly target by 1.9 times and reach 71% of MBS's projection.

TGDD&DMX’s recovery

The BHX's future development might greatly increase its reach in new regions. In FY25F-26F, the total number of shops is projected to rise by 248/282. Revenue and store growth will be slowed by the emphasis on building new locations; this might alter by -0.2% or 1% year over year in FY25F–26F. MBS anticipates that BHX's net profit might reach VND 410/444 bn in FY25F-26F if the SG&A expense/total sales is maintained.

This stock company anticipates that the pace of MWG store closures will drop in 2025 (-5% year over year) and stay steady in 2026 (0% year over year) as the trend of shop closures declines. In FY25F–26F, the total number of TGDD&DMX shops might reach 2,895/2,895 outlets. Due to (1) the selling price base still having potential for an increase following the 2023 "price-war" and (2) the single-digit demand growth, the TGDD&DMX's revenue is predicted to climb by 9%/13% year over year. Nguyen Quynh Ly, an analyst at MBS, predicts that TGDD&DMX's net profit growth rate might reach 24% in FY25F–26F if the SG&A expense/total sales ratio is maintained. In FY25F-26F, MWG's net profit is expected to rise by 37%/23% year over year.

Investment strategy

With over 3,000 locations, MWG is a prominent ICT-CE retail corporation that holds a 50% CE (consumer electronic) and around 60% ICT market share. MWG's leadership position will give them further advantages if the market for ICT-CE starts to revive. Additionally, MWG owns Bach Hoa Xanh, which has about 1,900 stores, mostly in HCM city, the south, and is growing into new locations in the South-Central region.

MWG will enter the expansion phase in new regions (South-Central) after reaching net profit in 2024. Given the robustness of its contemporary market retail strategy, MWG might not encounter many major obstacles while growing into new areas. In FY25F–26F, Ly anticipates that BHX will open 248/282 new shops, with around 70% of them in completely untapped markets. BHX's net profit is projected to reach VND 411/440 bn in FY25F-26F by keeping costs constant.

TGDD&DMX may finish closing its shops in 1Q25 and keep the entire number of stores open until the end of 2026 as the trend of store closures slows down. The revised distributor assistance rules and streamlined expenditures may hinder a robust recovery in the gross margin, but they will increase the effectiveness of MWG's sales approach. Therefore, TGDD & DMX's total revenue will grow by 9%/13% year over year in FY25F-26F due to higher sales volume and an expected 5% year over year increase in selling prices (because price hikes are still possible beyond the 2023 pricing war). Therefore, in FY25F-26F, the compound net profit growth rate is expected to reach 23%.

As of right now, MWG's forward P/E for 2025 is 17.2x, which is lower than the average of 20-22x (19x). In the midst of a robust net profit recovery, we believe MWG is undervalued to an appealing purchasing level, Ly stated.

“Our TP of 81,700 VND/share remains unchanged as we repeat ADD. The recovery expectation for consumer electronics after 2024 and the wider coverage size of BHX in comparison to the prior report are the two main reasons we revised down the EPS FY25F-26F prediction by 3%/7%. We calculate the target price for MWG using DCF for ICT-CE and BHX (WACC: 10.7%)”, said Ly, adding that MWG has encountered several difficulties, including BHX's rev/store (which opened more than a year ago) failing to reach 1.9-2 bnVND/month, which might lead to BHX's net profit falling short of projections. Due to unforeseen political circumstances or the global trade war, the retail industry is recovering more slowly.