Retail sector: Recovering from a low base

PNJ's 2022 outlook is mainly underpinned by a recovery from the low base of 2021.

>> Retail maintains growth despite pandemic

The impact of the pandemic

According to the General Statistics Office, the total retail sales of consumer goods and services in November 2021 reached VND397.1 trillion, up 6.2% MoM and down 12.2% YoY. The figure in 11M21 was VND4,128 trillion, down 8.7% YoY, of which the retail sales of goods were VND3,430.6 trillion, down 4.3% YoY. The total retail sales of goods in some big cities all tended to go down compared to the same period in 2020, namely Hanoi (-1.5%), Can Tho (-3.1%), and Ho Chi Minh City (- 24.8%).

In general, the pandemic and social distancing protocols have put great pressure on retail businesses of non-essential items (Phu Nhuan Jewelry – PNJ and Vincom Retail - VRE) as they have to continuously limit   direct sales or close stores for a long time, especially in 3Q21. However, e-commerce and distribution businesses are less affected thanks to the rising demand for remote learning and working (Digiworld-DGW).

Catalyst for recovery

KB Securities believes that the retail industry will have stronger growth in 2022 than in 2021, especially for companies whose business results were affected strongly in 3Q21, such as PNJ and VRE, or partly affected, such as Mobile World Investment (MWG).

"These businesses would have a brighter outlook in the next year based on: (1) the government’s decision not to apply wide-scale distancing in the "new normal", which will facilitate direct selling activities; (2) a larger market share for large enterprises as small ones face difficulties, and (3) improved consumption when the economy becomes more stable," KB Securities said.

However, COVID-19 is a key risk to the whole retail industry in 2022. The possibility of large-scale social distancing in the near future is very low, but the risk is still present as major cities have continuously recorded new peaks of coronavirus infections in the past months. Prolonged and large-scale social distancing measures would cause disruption to retailers’ business operations and slow down new store opening speeds.

Stock picks

Among the retail sector’s shares, KB Securities recommends investors watch MWG and PNJ. In which, PNJ recorded a loss of VND697 billion (-14.6% YoY) on revenue of VND14,594 billion (8.1% YoY) in 10M21. After three months of recording write-offs due to the severe impact of the pandemic, PNJ managed to post a profit gain from October 2021. PNJ's 2022 outlook is mainly underpinned by a recovery from the low base of 2021.

Besides, MWG’s 11M21 earnings were VND4,395 billion (22% YoY) on revenue of VND110,530 billion (11% YoY). The recovery in the company’s performance is mainly supported by two store chains (TGDD and DMX). The BHX chain recorded revenue of VND1,800 billion in November and continued to record positive EBITDA. So, KB Securities forecasts MWG's PAT at VND4,451 billion (13.5% YoY) on revenue of VND115,465 billion (6.3% YoY) for 2021; and PAT at VND6,062 billion (36% YoY) on revenue of VND138,928 billion (20% YoY) for 2022. "We recommend buying MWG shares with a target price of VND168,800/share, 22% higher than the closing price on November 16, 2021, at VND137,900/share", KB Securities said.