Earnings Flash:

* VTP announced its Q1 2024 results with net revenue of VND4.7tn (-2% YoY) and NPAT-MI of VND58bn (-23% YoY), fulfilling 34% and 15% of our respective full-year forecasts. Q1 revenue beat our expectation due to higher-than-expected trading revenue (primarily from the mobile phone card selling business), while Q1 NPAT-MI tracks behind our forecast mainly caused by lower-than-expected GPMs. We foresee potential downside risk to our 2024F forecasts, pending a more comprehensive review.

* Net revenue:

- Services segment: VTP delivered 29% YoY growth in net revenue of the services segment in Q1, which we believe to be driven by strong growth in parcel volume. According to the Ministry of Information and Communications, total parcel volume in Vietnam increased by more than 47% YoY in Q1. In addition, total revenue from the top five e-commerce marketplaces in Vietnam (i.e., Shopee, Lazada, Tiktok Shop, Tiki, and Sendo) increased by 79% YoY in Q1 2024, per Metric – a third-party market research firm.

- Trading segment: Revenue declined 26% YoY due to VTP scaling down its mobile phone card selling business. However, the actual magnitude of scaling down was smaller than our expectation.

* Margins:

- GPM of the services segment compressed to 6.1% in Q1 2024. We partly attribute this to the average Vietnamese RON-95 gasoline retail price increasing 2% YoY in Q1 2024. Given the contribution of the services segment increasing to 58% of total revenue in Q1 2024 vs 44% in Q1 2023, blended GPM fell slightly to 3.6% in Q1 2024.

- According to VTP, the increase in selling expenses was partly spent on developing the customer base for its core businesses (delivery and logistics services). This partly drove down the net margin by 30 bps to 1.3% in Q1 2024.

VTP’s Q1 2024 results 

Source: VTP, Vietcap

AGM Note:

* Overall, management emphasized VTP’s strategy of (1) refocusing on its core businesses in 2024 and (2) developing its business leveraging on its strengths of being a subsidiary of Viettel Group going forward, such as developing national infrastructure (i.e., Vietnam-China smart border gates).

1. Summary of key resolutions:

* Shareholders approved 2024 guidance including total revenue of VND13.2tn (-33% YoY) and NPAT of VND370bn (-3% YoY), which are both equivalent to 96% of our forecasts. The YoY drop in total revenue is due to VTP planning to spin off its mobile phone card selling business, which is partly offset by higher profits from its core businesses, per the company’s guidance.

* Shareholders approved a FY2023 cash dividend and FY2024 cash dividend guidance of VND1,500/share (2% yield) each year.

2. 2024-2029 plan:

* VTP sets the 2024-2029 average annual growth rate target for revenue at 20%-25% and NPAT at 15%-20%. Management attributes the lower target for NPAT growth vs revenue growth to recognizing depreciation expenses from new investments.

3. Delivery service segment:

* Growth: Management maintains its target for the delivery service industry to outperform the industry’s growth, enabling VTP to at least maintain its current third position or advance its position.

* Revised Postal Law: VTP has worked with the relevant authorities to propose that sellers on e-commerce platforms be granted the rights to choose delivery service providers instead of choosing the in-house delivery service provider of each e-commerce platform by default as currently. Per VTP, this proposal should create fair competition in the industry, giving potential room for VTP to acquire more clients from e-commerce platforms.

4. Logistics service segment:

* Vietnam: VTP’s focus on the domestic market is investing in logistics infrastructure for FMCG. Per management, logistics costs are equivalent to approximately 4%-5% of the FMCG market size.

* Overseas markets: Management aims to boost overseas investment including (1) launching a delivery service business in Laos and (2) establishing representative offices in Thailand and China to study potential opportunities.

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