MSN – H1 NPAT-MI exceeds our forecast; management confident in WCM’s positive NPAT in Q3 & Q4 – Earnings Flash & Analyst Meeting Note
  • 2024-07-26T00:00:00
  • Company Research
  • H1 2024: Revenue was VND39tn (+4% YoY) and NPAT-MI was VND607bn (+90% YoY), completing 46% and 57% of our respective 2024 forecasts. NPAT-MI exceeded our expectations mainly due to better-than-expected shared profit from TCB. Nonetheless, MSN’s operating profit slightly trailed our forecast mainly due to weaker-than-expected EBIT from WCM and PL.
  • Q2 2024: Revenue grew 8% YoY and NPAT-MI surged 4.8x YoY. Revenue was mainly driven by (1) Masan Consumer Corporation (MCH UpCOM) and (2) WCM. The surge in NPAT-MI was mainly driven by (1) 39% YoY growth in shared profit from TCB and (2) a 30%-decrease in MHT’s net loss after MI.
  • MCH UpCOM: 

- Q2 2024: Revenue rose 14% YoY, primarily fueled by convenience foods (+21% YoY) and beverages (+18% YoY). MCH’s GPM improved by 30 bps YoY to 46%, while its EBITDA margin dropped 80 bps YoY to 25% due to investment in product innovation. MCH’s NPAT increased 13% YoY in H1 2024 and grew 8% YoY in Q2 2024, according to our estimates.

- HOSE listing: MSN expects to complete the process to list MCH UpCOM on HOSE within this year or early next year.

  • WCM: 

- Q2 2024: Sales increased 9% YoY due to (1) 162 net new stores and (2) LFL growth of 7% YoY. Its EBIT margin decreased by 90 bps QoQ to -1.1% in Q2 (vs -0.1% in Q1 2024), which we mainly attribute to lower sales QoQ. 

- H1 2024: WCM’s sales grew 9% YoY (corresponding to an LFL growth of 7% YoY), and EBIT loss was reduced by 66% YoY to VND94bn – equivalent to an EBIT margin of -0.6%. 

- WCM achieved positive NPAT in June 2024, driven by (1) LFL growth of 9.7% YoY with total sales of ~VND2.8tn and (2) a reduction in wastage cost, according to management. Management believes it can deliver positive NPAT for WCM in Q3 and Q4 2024, if WCM manages LFL growth of 9% in these two quarters. As a result, in the short term, WCM will focus on improving LFL traffic and basket size growth. In the medium term, WCM plans to increase sales contributions from private labels to 15% from 4% currently.

- Store expansion: Store count of WinMart+ (WMP) increased by 43 in H1 2024 (behind our forecast of 500 new WMP in 2024),  reaching 3,644 in total. Additionally, the store count of WinMart supermarket (WMT) was stable at 129. Management said it has been conservative with store openings, focusing instead on (1) revamping existing stores and (2) renovating minimarts to the WIN concept. In H2 2024, it expects to open ~100 new minimarts in each quarter, aiming for a total of ~300 new stores in 2024.

  • MHT: In Q2 2024, revenue was +4% YoY. EBIT grew to VND154bn in Q2 (from a loss of VND312bn in Q1) due to increasing APT and copper prices. Regarding NPAT-MI, MHT reduced its net loss by 50% QoQ to VND359 bn in Q2. Management aims for MHT to turn profitable in Q4 2024.
  • MML: 

- In Q2 2024, sales grew 5% YoY, mainly driven by (1) 22%-YoY growth in processed meat and (2) 33%-YoY growth in branded fresh pork, which was partly offset by a 33% decrease in farm chicken sales because MML restructured this business. MML’s EBITDA margin improved by 5.9 ppts YoY to 7%. 

- MML will prioritize processed meat as a key growth driver, targeting a contribution of 50% to total sales within three years, up from 31% in Q2 2024.

  • Phuc Long (PL): In Q2 2024, revenue increased 5% YoY, and  the EBITDA margin improved by 1.2 ppts YoY to 18%.
  • Net debt/EBITDA was down to 3.3x as end-Q2 2024 compared to 3.9x at YE 2023. This improvement resulted from better working capital, USD250mn in equity raised from Bain Capital in April, a USD54mn deposit received from Mitsubishi Materials Corporation as part of the H.C. Starck purchase, and VND1tn in dividends from TCB.
  • Capital deployment: MSN does not plan to heavily invest in new businesses. It still looks for opportunities to raise equity capital to pay down debt. If MSN were to pursue any new initiatives, it will collaborate with partners to ensure that the capital outlay is manageable.
  • Our view: As the H1 2024 NPAT-MI exceeded our expectation, we see potential upside to our NPAT-MI forecast, pending a fuller review. Regarding consumer-retail operating profit, MCH UpCOM’s EBIT and MML’s EBIT aligns with and exceeds our expectations, respectively, while WCM and PL fell short of our expectations. On the other hand, MHT’s EBIT improvement, as well as MSN’s net debt/EBITDA of 3.3x as of Q2 2024, broadly align with our expectations.

Figure 1: MSN’s Q2 2024 results

VND bn

Q2 2023

Q2 2024

YoY

H1 2023

H1 2024

YoY

2024F

H1 2024 as % of 2024F

Net revenue 1

18,609

20,134

8%

37,315

38,989

4%

85,354

46%

  • MCH UpCOM

6,478

7,387

14%

12,515

13,968

12%

32,178

43%

  • WCM

7,182

7,844

9%

14,517

15,801

9%

33,971

47%

  • PL

372

391

5%

783

778

-1%

1,772

44%

  • MML

1,703

1,790

5%

3,303

3,510

6%

7,173

49%

  • MHT

3,529

3,652

3%

7,315

6,742

-8%

15,026

45%

 

 

 

 

 

 

 

 

 

EBIT

992

1,305

31%

1,902

2,008

6%

6,116

33%

  • MCH UpCOM2

1,480

1,635

10%

2,682

3,148

17%

7,452

42%

  • WCM2

-96

-84

-13%

-279

-94

-66%

245

-38%

  • PL2

17

40

135%

24

68

183%

252

27%

  • MML

-108

5

-105%

-207

9

-104%

-156

-6%

  • MHT

-37

154

-516%

326

-158

-148%

352

-45%

  • -       Interco adjustments

-264

-446

69%

-644

-965

50%

-2,031

48%

 

 

 

 

 

 

 

 

 

TCB’s contribution

892

1,236

39%

1,853

2,465

33%

4,335

57%

Net financial income

-1,449

-1,405

-3%

-2,789

-2,730

-2%

-5,826

47%

Financial income

690

647

-6%

1,339

1,221

-9%

1,647

74%

Financial expense

-2,139

-2,052

-4%

-4,129

-3,951

-4%

-7,473

53%

 

 

 

 

 

 

 

 

 

NPAT

429

946

121%

868

1,425

64%

3,567

40%

NPAT-MI

105

503

379%

320

607

90%

1,066

57%

EBITDA 3 margin

17.0%

19.0%

 

17.2%

18.2%

 

18.7%

 

  • MCH UpCOM

25.7%

24.9%

 

25.0%

25.5%

 

 

 

  • WCM

2.2%

2.2%

 

1.5%

2.7%

 

 

 

  • PL

16.9%

18.2%

 

16.3%

17.0%

 

 

 

  • MML 

1.1%

7.0%

 

1.4%

7.1%

 

 

 

  • MHT

10.1%

15.9%

 

15.6%

10.4%

 

 

 

EBIT margin

5.3%

6.5%

 

5.1%

5.2%

 

7.2%

 

NPAT-MI margin

0.6%

2.5%

 

0.9%

1.6%

 

1.2%

 

Net debt/EBITDA 3

4.1x

3.3x

 

 

 

 

3.3x

 

Source: MSN, Vietcap

1 Consolidated revenue is lower than the sum of its subsidiaries’ revenue due to intercompany transactions.

2 Vietcap’s estimates due to the absence of company’s financial data at the time of report.

3 EBITDA includes TCB’s contribution.

Powered by Froala Editor