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Company Quarterly Earnings Update – MWG VN – Q4 2023
Summary of 2023 results and outlook of Mobile World Group (MWG VN)
- Net revenue saw an 11.3% y/y decrease to VND118trn, primarily due to a 19.4% decline in revenue of consumer electronics and appliances chains (TGDD & DMX), constituting 70.6% of total revenue. This decline was driven by weakened discretionary spending amidst slowed economic growth, particularly in export-oriented and real estate sectors. To boost sales, MWG implemented price reductions, resulting in a reported gain of over 5% in market share for its key consumer electronics and appliances products. Conversely, BHX, the groceries minimart chain, saw a robust 16.6% y/y revenue increase, contributing 26.7% to total revenue. Additionally, other segments expanded by 19.7% y/y, albeit with a modest 2.7% contribution.
- Net profit dropped sharply by 95.9% y/y to VND168bn. Operating margin evaporated to 0.3% from 5.0% in 2022, mostly because of the lower selling prices. Net financial income surged and mitigated the loss in operating profit. Hence, the net margin declined by 3.0 percentage points, less than the operating margin, to 0.1%.
- The financial structure remained strong with moderate leverage (D/E and D/A ratios of 1.08x and 0.42x respectively). Working capital turnover stood at 71 days.
- We expect a gradual recovery in consumer electronics and appliances spending in 2024, with stronger growth forecasted for 2025. This is backed by an anticipated 6.0% GDP growth in 2024. Q4/2023 saw increased consumer finance disbursement, with further boost expected in 2024. Positive signs of stronger economic growth and increased discretionary spending include Vietnam’s January and February PMI hitting 50.3 and 50.4 points respectively, and Q4/2023 auto sales posting the first positive y/y growth after four quarters of decline. Long-term projections show growth in consumer electronics & appliances and modern groceries at CAGRs of 4.5% and 6.2% respectively. To maintain its market share, MWG plans to continue its competitive pricing. Earnings for 2024 and 2025 will mostly driven by recovered demand for consumer electronics products leading to higher selling prices and reduced spending on promotions. However, long-term growth for MWG may be constrained by dominant market shares held by TGDD & DMX, high competition for BHX in major cities, and the considerable time needed for other businesses to scale up.
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Featured image credit: https://mwg.vn/
