FPT - 20% YoY earnings growth momentum continues

FPT released its Q1 2024 preliminary results with revenue of VND14.1tn (USD564mn; +21% YoY) and NPAT-MI of VND1.8tn (USD72mn; +20% YoY), completing 22% of each of our respective full-year forecasts. As earnings results are tracking in line with our expectations, we see no material risk to our current projection, pending a fuller review.

Global IT Services: Revenue +29% YoY & PBT +28% YoY. In Q1 2024, digital transformation (DX) revenue advanced 36% YoY and accounted for 42% of total global IT revenue. FPT enjoyed sales growth across markets, whereby Japan and APAC led with revenue growth of 34% YoY and 33% YoY, respectively, in addition to a 44% YoY surge in revenue from the EU market. Revenue from the US grew at double-digit rate of 16% YoY in Q1 2024, which we believe to signal positive growth acceleration in this high-profit-margin market. On the other hand, the new signed value declined 3% YoY in Q1 2024 on a high base to VND9.8tn (USD393mn), as FPT accelerated the signing process of new orders in December 2023.

Telecom Services: Revenue +6% YoY and PBT +14% YoY. In Q1 2024, telecom services’ PBT margin expanded 1.1 ppts YoY to 20.7% in Q1 2024 due to improvements in cost efficiencies across subsegments.

Education: Revenue +26% YoY. Robust growth continues in light of strong demand for tech and private education. FPT completed its FPT Education Complex project in Thanh Hoa Province after three months of construction and expects to add 500 students in the upcoming 2024-25 academic year.

We currently have a BUY rating for FPT with a target price of VND125,700/share.

FPT’s Q1 2024 results

VND bn	Q1 2023	Q1 2024	YoY	Q1 2024/ Vietcap’s 2024F	Vietcap’s comments
Revenue	11,681	14,093	21%	22%
Technology	6,843	8,472	24%	21%
- Global IT	5,434	6,999	29%	22%	* Revenue from Japan/APAC/EU/US market grew 34%/33%/44%/16% YoY. * In Q1 2024, revenue from DX services rose 36% YoY, while the new orders value declined 3% YoY as FPT accelerated the signing process of new orders in December 2023.
- Domestic IT	1,407	1,472	5%	19%
Telecom	3,788	4,012	6%	24%
- Telecom Services	3,695	3,885	5%	24%	* Fixed-broadband revenue grew 9% YoY while other non-broadband revenue grew 1% YoY.
- Online advertising	95	127	34%	17%
Education	1,412	1,776	26%	21%
Investment & others	-364	-167	N.M.	N.M.
PBT	2,121	2,534	19%	23%
Technology	906	1,155	28%	22%
- Global IT	875	1,115	28%	23%
- Domestic IT	18	41	128%	10%
Telecom	724	826	14%	24%
- Telecom Services	723	805	11%	25%	* Profit margin expanded 1.1 ppts YoY to 20.7% in Q1 2024 due to improvements in cost efficiencies across subsegments.
- Online advertising	1	20	31x	11%	* Profit growth due to FPT’s clients’ higher marketing spending in a better macroeconomic environment in Q1 2024.
Education, investment & others	491	553	13%	22%	* Due to a higher provision for investment in start-ups and other businesses that partially offset for growth in education profits.
NPAT-MI	1,494	1,798	20%	22%

Source: FPT, Vietcap