We attended ACG’s online AGM on May 6. Our key takeaways are as follows:

Revenue: VND3.8tn (USD152mn; +1% YoY; 93% of our 2024F).

NPAT: VND440bn (USD18mn; +1% YoY; 83% of our 2024F).

Per ACG, these targets were set at the beginning of the year and are conservative. In case the market outlook improves in mid-2024, ACG will lift its targets. As such, we only foresee slight downside risks to our forecasts, pending a fuller review.

The property market’s weakness continues to indirectly drag on roughly one third of ACG’s sales. In addition, ACG was also hurt by lower consumer disposable income. The company expects significant demand recovery in 2025, not in 2024.

Now that ACG has covered all of Vietnam’s 63 cities/provinces, it will slow down expanding the number of showrooms and franchised showrooms. 

Instead, it will focus on the quality of touchpoints, promoting brand recognition, and R&D. ACG established a department for e-commerce and online virtual showrooms.  These moves prepare ACG for market recovery and support market share gains in the medium and high-end segments going forward.

3. Export market

Per ACG, its 2024 exports revenue could double YoY to ~VND1.2tn (USD47mn; 177% of our 2024F). ACG’s Q1 2024 exports revenue jumped 34% YoY. The company has received orders for delivery until November 2024. ACG foresees even better demand for the medium term as well as headroom for export GPM improvements.

Export demand was only partly contributed by Sumitomo Forestry – its strategic partner and shareholder. Instead, its recent export success was mainly due to (1) the development and marketing of high-end furniture that is 15% cheaper than its German and Italian counterparts and (2) the changing preference towards these products of US customers – ACG’s main market. ACG will focus on the US and Southeast Asian markets going forward.

ACG’s export product factory has been operating at full capacity since mid-2023. It has been outsourcing a part of orders to other manufacturers. ACG has formalized processes for outsourcing and plans to rely on outsourcing going forward, instead of expanding production capacity whenever orders exceed its capacity. This serves to protect ACG against the cyclical nature of market demand. 

In terms of ESG compliance, ACG claims to be top-tier in Vietnam’s wooden product industry and currently meets 85% of its customers’ ESG requirements. It is constantly implementing new technologies and measures to meet higher requirements and gain orders from its customers.

2024G capex: USD3.2mn vs USD2mn in 2023, mainly for maintenance and small upgrades.

ACG is operating at ~70% of its total capacity and could increase its revenue to VND6tn (USD240mn) at full capacity utilization and VND8tn-9tn if outsourcing is included. While export capacity has been fully utilized, other domestic products, such as door and flooring production lines, are only operating at ~60% of capacity.

ACG ramped up digitalization and simplified its organizational structure in 2023 in its warehouses, logistics, and property project channel salesforce. Its number of employees was down 6% YoY by YE2023 partly due to this move, but this number is expected to increase by 2% in 2024 as revenue recovers.

ACG expects financial income to soften as the company lowers its risk appetite after some higher-risk investments expired in 2023. In terms of ACG’s loan to Novareal, the latter repaid 10% and expects to pay more beginning in June 2024. 

FY2023: VND1,500/share (VND700/share paid in Q4 2023, VND800/share to be paid in Q2 2024.

FY2024: Minimum 15% of par value (in cash or in stock). The company strives to lift this ratio to 20%-25% if 2024 business results are favorable.

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