Company Quarterly Earnings Update – MWG VN – 2020 9M

Summary of the 2020 9M results of Mobile World Group (MWG VN)

9M/2020 results highlights:
  • MWG’s sales increased by only 6.0% y/y, reaching VND81,352bn, thanks to groceries’ new opened stores and increase in same store sale growth (SSSG) as consumers switch to modern trade to avoid getting infected. On the other hand, the pandemic dampened consumers spending for big-ticket items, affecting MWG’s electronic segment. By Sep 2020, MWG had 3,709 stores, +687 stores YTD.
  • While MWG’s gross margin reached 21.7%, thanks to better procurement of fresh products and better trading terms with FMCGs suppliers, its operating margin remained at 4.9% (-10 bps y/y), as the groceries segment has higher operational expenses (as a percentage of sales) than electronic segment (due to lower revenue per store, and higher distribution cost). Overall, MWG’s net profit stayed flat.
  • By the end of Q3/2020, debts, which were mostly short-term used for working capitals, was still manageable, with D/E and D/A of 0.85x and 0.32x, respectively. These were lower than the 2-year average of 1.01x and 0.32x, respectively.
Outlook
  • In Q4/2020, consumers’ demand for big-ticket items will remain weak due to the COVID-19 outbreak. As a result, we expect MWG’s revenue to grow by only 3.1% y/y during this period, mostly driven by BHX’s expansion and its stable SSSG. FY2020, we expect MWG’s revenue to grow by 5.3% y/y, reaching VND107,559bn. Its net profit will increase by 2.7% y/y, and net margin will stay at 3.6% (-20bps y/y).
  • We expect the economic situation will normalize, and MWG will return to its long-term trend. According to Euromonitor, the country’s penetration rate for some home appliances products like washing machines (45%), and microwaves (8%) is still relatively low compared with countries like Singapore, Japan, and South Korea. We expect BHX will continue benefiting from the switch from General Trade (GT) to Modern Trade (MT), which only contributes 20-30% to the total retail trade in Vietnam (vs. 50% in Thailand). As a result, we forecast MWG’s sales and net profit will reach VND130,876bn (+20.8% y/y) and VND4,402bn (+15.2% y/y) in 2021.

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