Summary of MSN’s H1 2021 results

- In H1 2021, revenue advanced 16% YoY while NPAT-MI reached VND979bn (USD43mn) vs VND117bn (USD5.1mn) in H1 2020. Revenue was lifted by Masan Consumer Holdings (MCH), Masan Meat Life (MML) and the consolidation H.C.Starck (HCS), while VinCommerce’s (VCM) revenue fell due to aggressive closures of underperforming stores in 2020. 

- Despite its revenue decline, VCM contributed to MSN’s bottom-line improvement as VCM’s profitability continued to improve on the back of savings from the closed stores, margin negotiations with suppliers and cost control. In addition, consumers stocking up on essential goods and the closure of wet markets amid renewed social distancing restrictions boosted traffic to modern grocery formats such as those of VCM — especially its minimart format VinMart+.    

- MSN’s H1 2021 results are broadly in line with our expectations — pending a fuller review — as revenue, EBITDA (including TCB’s contribution) and NPAT-MI completed 44%, 42% and 31% of our respective full-year forecasts. We believe MSN’s profits will increase in following quarters as MCH’s quarterly revenue typically ramps up in the second half. Additionally, we see scope for margin improvements in H2 vs H1 2021 for VCM, MML and Masan Hi-Tech Materials (MHT).

Key takeaways from each business segment

- MCH: All categories delivered growth in H1 2021. Notably, convenience foods returned to growth in Q2 2021 (+12% YoY) backed by consumers stocking up and market share gains. Meanwhile, the entire beverage category advanced 17% YoY — including a 18% YoY increase in energy drinks. Masan expects this category to face stronger headwinds going into Q3 2021 due to stepped-up social distancing restrictions but still targets growth for the remainder of 2021. 

- VCM’s EBITDA margin increased to 2.2% in Q2 2021 vs 1.8% in Q1 2021 and 0.2% in Q4 2020. VCM delivered positive EBIT in June 2021 and targets to achieve break-even EBIT in Q3 2021 thanks to improvements in total commercial margins (TCM) through negotiations with suppliers, cost optimization (e.g., store operations and logistics) and higher sales/store. Masan targets VCM’s TCM will increase by a total of ~3 ppts in 2021 (2.4 ppts was already achieved in H1 2021).

- MML’s profits ratcheted up thanks to (1) strong feed revenue growth that overcame spikes in raw material costs (e.g., corn and soybeans) — led by pig feed sales that rebounded in conjunction with domestic pig farming activity — and (2) integrated meat revenue doubling YoY backed by expanding distribution and the consolidation of 3F Viet — MML’s poultry subsidiary. Management expects MML’s margins to improve in H2 2021 given the recent correction in raw material prices and a continued ramp-up in meat capacity utilization.

- MHT: Revenue soared on the HCS consolidation as well as increases in both tungsten volume and ASP. EBITDA margin improved to 22.8% in Q2 2021 vs 16.1% in Q1 2021 and 11.5% in Q2 2020 as the increased tungsten prices started to reflect more fully in MHT’s realized selling prices.