DGW – Earnings miss projection due to weaker-than-expected GPM - Earnings Flash
  • 2024-05-02T00:00:00
  • Company Research
  • Q1 2024: Net revenue jumped 26% YoY to VND5.0tn (USD199mn) and NPAT-MI grew 16% YoY to VND92bn (USD4mn), completing 23% and 20% of our respective 2024F forecasts. NPAT-MI fell slightly short of our expectation due to lower-than-expected GPM in Q1.
  • Q1 segmental performance: DGW witnessed growth across several sectors, with outstanding performances in mobile phone revenue (+29% YoY, 49% of total sales in Q1) and office equipment (+48% YoY, 20% of total sales in Q1). Strong phone sales growth was mainly due to strong sales of Xiaomi’s new phone models, combined with sales increasing from a low base in Q1 2023. The surge in sales of office equipment was driven by the growing sales contribution from Achison1. Additionally, laptops & tablets (23% of total sales in Q1) increased 4% YoY. Total sales of home appliances and consumer goods (8% of total sales) jumped 38% YoY due to the growing contribution from new brands.
  • Profitability: EBIT margin came back to 2.4% in Q1 2024, which is relatively similar to the pre-COVID level (i.e., 2018-19), but tracked behind our expectation. While DGW’s gross profit margin improved by 120 bps YoY, its SG&A/sales increased 130 bps YoY - driven by (1) a 128% YoY jump in advertising & promotion expenses and (2) 37% YoY growth in labor costs due to a higher number of employees, both of which are in accordance with DGW’s portfolio expansion over the past year. 
  • Our view: EBIT margin tracked behind our forecast as sales of laptops & tablets, which have high margins, fell short of our expectations in Q1. We see potential downside risk to our 2024F forecast, pending a fuller review.

Note: 1DGW has increased its stake in Achison (an industrial consumables distributor) to 75% as end-June 2023 from 60% as end-March 2023. 

DGW’s Q1 2024 results

VND bn

Q1 2023

Q1 2024

YoY

2024F

Q1 2024 as % of 2024F

Net revenue

3,960

4,985

26%

21,493

23%

  • Laptop & tablets

1,094

1,139

4%

6,319

18%

  • Mobile phones

1,899

2,442

29%

8,574

28%

  • Office equipment

682

1,010

48%

4,639

22%

  • Home appliances

165

210

27%

946

22%

  • Consumer goods

120

184

53%

1,014

18%

 

 

 

 

 

 

Gross profit

261

388

49%

1,861

21%

SG&A expenses

-164

-269

64%

-1,303

21%

EBIT

97

119

23%

558

21%

NPAT-MI

79

92

16%

459

20%

Gross margin

6.6%

7.8%

 

8.7%

 

SG&A/net sales

4.1%

5.4%

 

6.1%

 

EBIT margin

2.4%

2.4%

 

2.6%

 

NPAT-MI margin

2.0%

1.9%

 

2.1%

 

Source: DGW, Vietcap

Powered by Froala Editor