2024 may see recovery for tech retail (MWG)
2024 may see recovery for tech retail (MWG)
The arrival of 2024 has prompted investors to explore fresh narratives for the new financial year, and while the tech retail sector has yet to announce its final quarter results from last year, expectations are of a minor improvement following a decline in profits.
Despite decreasing demand due to the impact of a slowing economy, tech retail has entered a fierce price war, mainly under the influence of The Gioi Di Dong, resulting in the industry's profit margins dropping to its lowest level in many years and a bleak profit picture.
In the first three quarters of last year, profits from The Gioi Di Dong, Petrosetco, and Digiworld Corporation fell by 98 per cent, 46.5 per cent and 48 per cent respectively, compared to the same period in 2022. Meanwhile, FPT Retail incurred losses of $9.4 million for the same period, compared to a profit of more than $12.5 million the year before.
However, since November last year, the stock prices of Petrosetco (PET), FPT Retail (FRT), Digiworld (DGW), and Mobile World (MWG) have increased by 134 per cent, 90 per cent, 55 per cent and 18 per cent, respectively.
Historical data shows that the price-to-earnings ratio (P/E ratio) of the tech retail sector commonly fluctuates between 12–22. However, the current P/E ratios are 93 for MWG, 37 for PET, and more than 21 times for DGW.
Dragon Securities Company predicts that the smartphone market will return to positive growth in 2024 after two years of decline, thanks to the recovering confidence and purchasing power of consumers. However, the smartphone market shows signs of saturation over the long term, making it difficult to expect strong growth from retail or distribution companies in this sector.
In light of these concerns, many companies are expanding their operations to create new growth. For example, FPT Retail has recently expanded its Long Chau pharmacy chain.
As of the close of the third quarter last year, FPT Retail operated 1,384 Long Chau stores, an increase of 447 compared to the end of 2022, exceeding the target of opening 400 new stores in 2023. The pharmaceutical chain has been profitable since 2021, reporting a revenue of almost $400 million and pre-tax profit of $2.22 million in 2022. In the first nine months of 2023 alone, revenue reached $462 million.
Dragon Securities predicts that the revenue of the Long Chau pharmacy chain may achieve a compound annual growth rate of 17.3 per cent in the period 2024-2028, thanks to the company expanding the number of stores and coverage nationwide.
SSI Securities Company believes that scaling up will create conditions for the pharmacy to increase its profit margin in the long term. In the first nine months of 2023, the gross profit margin of Long Chau was around 21-22 per cent.
Similarly, at The Gioi Di Dong, after announcing unfavourable business results in the first three quarters of 2023 and closing 200 stores in the last three months of 2024, the company is aggressively restructuring its network of stores to ensure efficiency.
“If there are no extraordinary costs like last year, we believe that 2024 will be a less stressful year for The Gioi Di Dong," according to forecasts from Dragon Securities.
