ACG – Operating leverage, cooled expansion lift earnings from low base

ACG reported Q1 2024 results with revenue and NPAT increasing 2% YoY and 124% YoY, respectively, fulfilling 17% and 15% of our respective 2024 forecasts. As Q1 is typically a low season, we foresee insignficant changes to our forecasts, pending a more extensive review.
In line with management’s guidance, Q1 2024 domestic sales remained weak, edging down 4% YoY. 1.5 years of low primary condo trancsactions in Vietnam led to weak home furnishing demand.
Meanwhile, exports sales jumped 34% YoY, reflecting a recovery of Vietnam’s wooden furniture exports amid restocking activities from developed markets. In addition, the export GPM expanded from 13% in Q1 2023 to 25% in Q1 2024, as early customer acquisition costs in export markets are being phased out. This lifted blended GPM from 28% to 31% over the same period.
Exports’ gross profits more than doubled and accounted for 17% of the Q1 2024 gross profits. Their net profit contribution is higher because export sales are not as heavy in SG&A as with domestic sales.
SG&A/revenue cooled down from 25% in Q1 2023 to 22% in Q1 2024 because ACG slowed expansion of its distribution network now that it has covered 58 of Vietnam’s 63 provinces/cities.

ACG’s Q1 2024 business results

Source: ACG, Vietcap