Company Quarterly Earnings Update – MWG VN – 2020

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

2020 results highlights

  • Amidst the COVID-19 outbreak that dampened consumers spending power and demand for electronic items, MWG’s sales still grew by 6.2% y/y, reaching VND108,546bn, thanks to groceries’ new opened stores and increase in same-store sale growth (SSSG) as consumers switch to modern trade to avoid getting infected. By the end of 2020, MWG had 4,059 stores, +1,020 stores.
  • MWG’s gross margin increased by 3.0 percentage point to 21.7%, thanks to i) higher contribution of grocery chain (BHX) and ii) BHX’s improved margin, which was due to better procurement of fresh products and trading terms. However, the operating margin was nearly unchanged at 4.8%, as BHX has higher operational expenses (as a percentage of sales) than the electronic segment (due to lower revenue per store and higher distribution cost). Net profit was VND3,918 (+2.2% y/y).
  • By the end of 2020, debts, which mainly were short-term used for working capital, were still manageable, with D/E and D/A of 1.1x and 0.3x, respectively. These were somewhat similar to the company’s 2-year average.

Outlook

  • We expect the economic activities to be fully recovered in Q3/2021. However, spending on electronic devices will remain weak, as the pandemic impacts people’s income. In contrast, groceries will benefit from the switch from General Trade (GT) to Modern Trade (MT). FY2021’s growth drivers will be i) DMX supermini (DMX) expansion in the rural area, and ii) BHX’s store expansion and stable SSSG. We expect sales to grow by 23.2% y/y, reaching VND133,675bn. The operating margin will be nearly unchanged at 4.8%, as BHX’s higher gross margin will offset its higher operational expenses. Overall, we expect net profit to grow by 19.8% y/y.
  • For 2022, we expect the economy to normalize, enabling MWG to return to its long-term trend. Top and bottom line will grow by 9.9% y/y and 5.3% y/y, respectively.

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