- 2024-01-30T00:00:00
- Company Research
2023: Net sales were VND31.8tn (USD1.3bn; +6% YoY) and net loss was VND346bn (USD14mn; -189% YoY), equivalent to 99% and 165% of our respective full-year forecasts. Based on our estimates, FPT Shop’s net loss of VND475bn (USD19mn) was partly offset by Long Chau’s (LC) NPAT-MI of VND130bn (USD5mn). That said, both chains’ results fall short of our full-year forecast due to the larger-than-expected loss in Q4.
Q4 2023: Net loss was VND101bn, exceeding our forecasted net loss of VND60bn. According to our estimates, this was mainly due to (1) FPT Shop’s one-off expenses from closing stores and (2) LC’s net loss of VND12bn as the chain incurred one-off costs, including (i) bonuses for employees as a reward for surpassing its business guidance and (ii) clearing near-expired goods after the upgrade of its inventory counting system. Other one-off costs include investing in vaccination centers and digital transformation.
FPT Shop’s results: In Q4 2023, FPT Shop’s sales dropped 3% QoQ and 27% YoY. According to FRT, demand for the iPhone 15 cooled down quickly after its launch at end-Q3 2023. Conversely, online sales increased 9% QoQ in Q4, which accounted for 41% of FPT Shop's revenue in Q4. Additionally, the chain managed to maintain a similar GPM in Q4 (11.4%) to that in Q3 2023 (which is the high season for laptop sales that enjoyed higher GPM than its main product, iPhones) thanks to adjusting the product mix by adding home appliances, other phone brands, and more. Finally, FPT Shop closed 15 stores in Q4 and 31 stores in 2023, decreasing its store count to 755 at YE2023 (vs our expectation of 786 stores).
LC pharmacy’s average monthly sales/ store remained steady at ~VND1.1bn in Q4 2023, which coupled with 113 new stores opened in Q4, drove its sales to increase by 14% QoQ. This tracked ahead of our expectations that LC’s sales per store will soften as it expands into tier 2 & 3 regions. In 2023, LC opened 560 stores, increasing its store count to 1,497 at YE2023 (vs our expectation of 1,550 stores).
Profitability: Based on our estimates from FRT’s parent company’s financial statements, in Q4 2023, FPT Shop’s NPM decreased 60 bps QoQ to -2.2% due to one-off expenses. As for LC, its NPM remained resilient at 0.8% in 2023 after incurring a slightly negative net margin of -0.3% in Q4.
We note that at YE2023, FRT’s ownership rate in LC decreased to 80.47% from 84.6% as of end-September 2023 and 89.83% at YE2022 1.
Our view: Amid prevailing stagnant consumption, FPT Shop has taken measures to improve operational efficiency by (1) adjusting its portfolio mix toward higher-margin products, (2) stimulating online sales, and (3) closing underperforming stores. Additionally, the QoQ resilience in FPT Shop’s GPM in Q3 and Q4 2023 is in line with our observations that price discounts have been broadly alleviated across the ICT industry since June 2023. As such, we maintain our expectation that the chain will narrow its net loss by nearly 60% YoY in 2024. Regarding LC, as most of the costs incurred in Q4 were one-time expenses, we do not see any downside or upside potential to our 2024F forecasts. Finally, considering FRT’s adoption of a 25% employee-owned model for LC, we see potential downside risk to our valuation for FRT, pending a fuller review.
Note: 1 FRT attributed this decrease to the additional capital injection made by LC's employees to LC's charter capital since Q3 2023. According to FRT, in 2018 (LC's inception), LC required its employees to invest 25% of the total charter capital. FRT believes that the adoption of a 25% employee-owned model has solidified the alignment between employee and corporate interests, especially when LC was still a start-up business back in 2018. According to our compilation, FRT has injected capital into LC twice between 2020 and 2022 to expand LC's business. FRT has affirmed that it still adheres to the policy of reserving 25% of LC's charter capital for the broad-based group of LC’s employees. Nonetheless, FRT has allowed LC’s employees to make their payments over 2-3 years. As a result, FRT's ownership in LC has exceeded 75% since 2020 due to the delay in employees’ capital contribution. FRT expects that LC's employees will continue to contribute capital to increase employee ownership to 25%, with a capital contribution form of VND10,000/share.
FRT’s Q4 and 2023 results
VND bn | Q4 2022 | Q4 2023 | YoY | 2022A | 2023A | YoY | 2023F | 2023A as % of 2023F |
Net revenue | 8,458 | 8,690 | 3% | 30,166 | 31,850 | 6% | 32,119 | 99% |
| 5,456 | 3,964 | -27% | 20,689 | 16,185 | -22% | 16,613 | 97% |
| 3,002 | 4,727 | 57% | 9,477 | 15,665 | 65% | 15,506 | 101% |
Online sales 1 | 1,698 | 1,620 | -5% | 5,656 | 5,842 | 3% | 5,599 | 104% |
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Gross profit | 1,331 | 1,523 | 14% | 4,703 | 5,162 | 10% | 5,105 | 101% |
| 644 | 452 | -30% | 2,523 | 1,637 | -35% | 1,615 | 101% |
| 686 | 1,070 | 56% | 2,180 | 3,524 | 62% | 3,490 | 101% |
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SG&A expenses | -1,174 | -1,585 | 35% | -4,147 | -5,246 | 27% | -5,119 | 102% |
EBIT | 156 | -62 | -140% | 557 | -85 | -115% | -14 | 620% |
Financial income | 34 | 33 | -4% | 174 | 80 | -54% | 113 | 71% |
Financial expenses | -78 | -64 | -17% | -256 | -292 | 14% | -319 | 92% |
NPAT-MI | 95 | -101 | -207% | 390 | -346 | -189% | -210 | N.M. |
| 80 | -88 | -211% | 347 | -475 | -237% | -411 | 116% |
| 15 | -12 | -186% | 43 | 130 | 202% | 201 | 64% |
Gross margin | 15.7% | 17.5% |
| 15.6% | 16.2% |
| 15.9% |
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| 11.8% | 11.4% |
| 12.2% | 10.1% |
| 9.7% |
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| 22.9% | 22.6% |
| 23.0% | 22.5% |
| 22.5% |
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SG&A/net sales | 13.9% | 18.2% |
| 13.7% | 16.5% |
| 15.9% |
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EBIT margin | 1.9% | -0.7% |
| 1.8% | -0.3% |
| 0.0% |
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| 1.9% | -1.8% |
| 2.0% | -2.4% |
| -2.7% |
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| 1.7% | 0.2% |
| 1.5% | 2.0% |
| 2.8% |
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NPAT-MI margin | 1.1% | -1.2% |
| 1.3% | -1.1% |
| -0.7% |
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Source: FRT, Vietcap (1 online sales are included in FPT Shop’s sales)
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