MWG - BHX's net profit improves; EraBlue achieves profit in Q3, but earnings lag due to high G&A expenses - Earnings Flash
  • 2024-10-31T00:00:00
  • Company Research
  • 9M 2024: Net revenue was VND99.8tn (USD4.0bn; +15% YoY) and NPAT-MI was VND2.9tn (USD115mn; +37.1x YoY), fulfilling 75% and 65% of our respective 2024 forecasts. NPAT-MI was behind our expectations mainly due to higher-than-expected SG&A expenses/sales in 9M (the ratio tracked ahead of our 2024 forecast by 0.8 ppts).
  • Q3 2024: In Q3 2024, MWG’s sales grew 13% YoY and NPAT-MI was VND800bn (USD32mn; +20.6x YoY). BHX’s EBIT margin (and also NPM) improved to 0.8% in Q3 2024 (from 0.1% in Q2), in line with our expectation and on track to deliver management’s target of full-year net profit in 2024. Additionally, EraBlue made profit and contributed VND148mn to MWG in Q3 2024. There were several one-off expenses in Q3, including (1) other expenses which are store closure costs (VND258bn), and (2) a write-off expense (VND 107bn) related to the dissolution of Tran Anh Digital World JSC1. As of September 2024, the carrying value of Tran Anh was VND 107bn, which we expect MWG to write off in Q4 2024.
  • TGDD & DMX’s aggregate revenue increased 8% YoY in Q3 2024, led by 11%-growth of TGDD due to increased demand for iPhones in September. In September 2024, TGDD & DMX’s sales grew 8% YoY and 4% MoM, driven by demand for iPhones, laptops, and washing machines. EBIT margin was around 5.7% (+3.5 ppts YoY), 0.9 ppts below 2019’s level. 
  • BHX’s monthly sales/store improved to VND2.1bn in Q3 2024 (+4% QoQ). Its total sales increased 26% YoY and 5% QoQ. In September, BHX’s sales declined 2% MoM, mainly due to a slight drop in sales/store, which was nearly VND2.1bn. BHX generated VND90bn of net profit in Q3 (compared to VND7bn in Q2 2024).
  • Overall profitability: MWG’s EBIT margin improved 3.4 ppts YoY to 3.5% in 9M (1.4 ppts below the 2019 level), due to profitability improvement from both the ICT and grocery businesses. Nonetheless, this was slightly behind our expectation mainly due to higher-than-expected G&A expenses/sales as it increased by 1.6 ppts YoY to 2.7%. Specifically, G&A staff costs/sales increased 1.6 ppts YoY to 2.3% in 9M 2024. We partly attribute this to the low base of 9M 2023 when MWG optimized its G&A expenses to cope with the downturn of ICT sales in Vietnam. 
  • Store openings: In Q3 2024, MWG opened 25 new BHX and 15 new EraBlue stores. Conversely, it closed 86 ICT stores and 155 An Khang stores.
  • Our view: While revenue broadly aligns with our expectation, we see potential slight downside risk to our NPAT-MI forecast, mainly due to a (1) potential one-off expense related to Tran Anh in Q4, and (2) G&A expense tracking ahead of our expectation, pending a fuller review.

Note: 1 In late August 2024, MWG announced the dissolution of Tran Anh Digital World JSC, which was acquired by MWG in January 2018. In 9M 2024, MWG recorded a VND138bn write-off related to Tran Anh, classified under selling expenses. As of September 2024, the carrying value of Tran Anh was VND107bn.
 

MWG’s Q3 and 9M 2024 results

VND bn

Q3 2023

Q3 2024

YoY

9M 2023

9M 2024

YoY

2024F

9M 2024 as % of 2024F

Net revenue

30,288

34,146

13%

86,858

99,767

15%

133,212

75%

  • TGDD (including TopZone)

7,322

8,134

11%

20,672

21,620

5%

30,036

72%

  • DMX

13,463

14,302

6%

41,692

45,045

8%

58,797

77%

  • BHX

8,633

10,840

26%

22,323

30,329

36%

41,874

72%

  • Others

870

871

0%

2,171

2,774

28%

2,505

111%

 

 

 

 

 

 

 

 

 

Gross profit

5,678

6,892

21%

16,334

20,912

28%

27,274

77%

SG&A expenses

-5,656

-5,817

3%

-16,206

-17,376

7%

-22,087

79%

  • Selling expenses

-5,314

-4,849

-9%

-15,310

-14,727

-4%

-20,395

72%

  • G&A expenses

-342

-968

283%

-895

-2,649

196%

-1,692

157%

EBIT

23

1,075

47.5x

129

3,536

27.5x

5,187

68%

  • TGDD & DMX 1

355

1,092

208%

1,365

3,824

180%

5,319

72%

  • BHX 1

-246

90

-136%

-905

-8

-99%

140

N.M.

  • An Khang 1

-84

-107

27%

-234

-279

19%

-272

103%

  • Other 1

-2

0

N.M.

-97

-1

-99%

0

N.M.

Net financial income

174

245

41%

426

741

74%

918

81%

Net other income/ loss

-15

-252

1603%

-84

-440

425%

-451

98%

PBT

182

1,068

487%

471

3,790

705%

5,572

68%

NPAT-MI

39

800

20.6x

78

2,875

37.1x

4,424

65%

Gross margin

18.7%

20.2%

 

18.8%

21.0%

 

20.5%

 

SG&A/net sales

-18.7%

-17.0%

 

-18.7%

-17.4%

 

-16.6%

 

  • Selling/net sales

-17.5%

-14.2%

 

-17.6%

-14.8%

 

-15.3%

 

  • G&A/net sales

-1.1%

-2.8%

 

-1.0%

-2.7%

 

-1.3%

 

EBIT margin

0.1%

3.1%

 

0.1%

3.5%

 

3.9%

 

  • TGDD & DMX 2

1.7%

4.9%

 

2.2%

5.7%

 

6.0%

 

  • BHX 2

-2.9%

0.8%

 

-4.1%

0.0%

 

0.3%

 

NPAT-MI margin

0.1%

2.3%

 

0.1%

2.9%

 

3.3%

 

Source: MWG, Vietcap (1 Vietcap estimates)

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