- We cut our target price (TP) for FRT by 10% but upgrade our rating from OUTPERFORM to BUY as the company’s share price has corrected ~15% over the last three months.

- Our lower TP is due to cutting our aggregate 2023-2025F NPAT-MI by 42% (106%/37%/13% cuts for 2023/24/25F), which is mainly the result of revising FPT Shop’s 2023F earnings to a net loss of VND138bn from previously a net profit of VND201bn because of significantly weaker-than-expected profitability in Q1 2023, coupled with our previous expectation for weak consumption throughout 2023. This is partly offset by rolling our TP horizon forward to mid-2024.

- We believe Long Chau (LC) is the largest modern pharmacy chain in Vietnam in terms of scale and has the highest EBIT margin (1.5% in 2022). We maintain our expectation that LC will widen its GPM by 100-150 bps p.a. by opening 400 stores in 2023 and an additional 200-300 stores p.a. over the next four years. We keep our projected GPM/NPM of 30.6%/4.0% in 2029F for LC, which are broadly in line with the five-year average median GPM/NPM of Asian regional peers of 30.8%/4.2%, respectively.

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