Tiêu đề RCVN23_Report-Submission_Round-2_University-of-Economics-HCMC.pdf ✅

DIGIWORLD JSC. 1 500 1000 1500 2000 0 30,000 60,000 90,000 DGW: Diversified Growth, Winning across segments 1 DIGIWORLD CORPORATION (DGW) GICS Sector: Information Technology GICS Industry: Electronic Equipment & Instruments TARGET PRICE: VND63,900/share LAST CLOSE: VND52,000/share (5 TICKER: HSX.DGW: (Ho Chi Minh Stock Exchange) th December, 2023) DATE: 5th December, 2023 RECOMMENDATION: BUY (26% Total Shareholder Return) EXECUTIVE SUMMARY CFA INSTITUTE RESEARCH CHALLENGE SEASON 2023 - 2024 Equity Research Initiation Report We initiate Digiworld (HSX.DGW) with a BUY recommendation and a 1Y target price (TP) of VND63,900/share, implying a total shareholder return of 26% from the closing price on 5 th December, FY23. Our TP is fueled by (1) Leading position to capture Vietnam's secular ICT demand growth, securing sustainable OCF, (2) Achison’s expansion with cross-selling opportunities to drive top-line growth for Office Equipment, and (3) Solid diversification strategy backed by Market Expansion Service capability to sustain long-term growth. DGW is well-positioned to become Vietnam’s leading Market Expansion Service (MES) provider DGW is the largest domestic MES in Vietnam ICT market (market share: 40% in laptop, 15% in Mobile Phones). DGW’s business model anchors 6 segments. The flagship lines include ICT (i.e., Laptops, Mobile Phones), and Office Equipment. The emerging segments are Consumer Goods (FMCG, Pharmaceutical), and Home Appliances. Strategy: DGW aims to (1) strengthen its flagship line by expanding established brands’ product lines, and (2) diversify into Consumer Goods and Home Appliance to capture sustainable growth with a more stable profitability. Revenue drivers: (1) vertical growth of existing brands, (2) horizontal growth – adding new brands. Cost drivers: (1) COGS, (2) SG&A (include established brands’ sales support and new brands’ MES costs). Our BUY recommendation is underpinned by 3 theses as follows 1) Leading position to capture Vietnam's secular ICT demand growth, securing sustainable OCF: Growing discretionary spending coupled with favourable market dynamics unlocks great potential for DGW’s Mobile Phones and Laptops segments. DGW's leading positioning with a diversified product portfolio from major brands could well capture this potential, securing ICT's position and strong operating cash flow. 2) Achison’s expansion with cross-selling opportunities to drive revenue for Office Equipment segment: The Personal Protective Equipment (PPE) market is riding on Vietnam’s industrial shift. DGW synergy with Achison, a 20-year experience PPE distributor, could exploit this potential and further open up cross-selling opportunities for the Office Equipment and Home Appliances in FY23-28. 3) Solid diversification strategy backed by MES capability to sustain long-term growth: Vietnam's FMCG & Pharmaceutical markets are thriving on the country's rising consuming class. DGW, with its strong in-house capability and experienced MES, could well capture this growth and achieve sustainable margins in FY23-28. Established segments secure robust revenue and earnings, while emerging segments fuel aggressive growth FY23 projections: We forecast NPAT-MI in FY23 to reach VND359bn (-47% YoY), equivalent to 90% of DGW’s FY23 guidance, and attribute the discrepancy between DGW’s guidance and our forecast to DGW’s higher promotion expenses to support sales in the context of weak demand and promote new brand partnerships. FY24 projections: We forecast NPAT-MI in FY24 to reach VND566bn (+57% YoY) mainly due to stronger demand in all segments as the economy recovers & consumer confidence returns, leading to (1) strong revenue growth for both essential and non-essential products and (2) reducing selling costs due to higher demand. FY23-28 projections: We forecast DGW’s EPS to grow at a 48% CAGR in FY23-25, mainly due to catalysts from flagship lines with (1) replacement cycle leads to higher demand for smartphones and laptops in FY24-25, (2) 2G shutdown from Dec.FY23 raises higher demand for low-to-mid-end smartphones, and (3) Win10 retirement in FY25 triggers the need for upgrading laptops. Besides, we also forecast EPS to grow with a CAGR of 18% in the FY25-28 period, mostly driven by emerging segments. This growth is boosted by (1) national digitalization driving higher demand for hard-and-software, (2) increasing office supply leading to higher need for office equipment, (3) the growth in households and income leading to strong demand for home appliances, and (4) rising population and health consciousness leading to higher demand for branded FMCG and supplementary products. A mix of DCF and Relative models yields an attractive valuation with substantial shareholder value DGW's valuation is attractive with projected P/E of 13.9/9.9 in FY24/FY25, which are 9%/35% lower compared to average P/E in FY18-23 of selected peers. We attribute the re-valuation for DGW to the increase in projected EPS by 57% in FY24 and 40% in FY25. Additionally, the recovery in ROIC during FY24-25 thanks to the recovery in ICT demand also make their book value cheaper with 3.0/2.5 P/B in FY24-25. Currently, we estimate DGW's weighted average cost of capital (WACC) is 11%, which is much lower compared to avg. of 22% ROIC in FY24-28, indicating that DGW’s business model is efficient and guarantees substantial shareholder value annually. DGW, with strong advantages and preparation, can well capture upside potentials, and mitigate downside risks We determine 2 upside potentials as follows: (1) More aggressive-than-expected brand expansion in FMCG, and (2) Potential synergies with CTR. Also, 3 key downside risks are (1) Slower-than-expected economic recovery, (2) Delay in 2G cut (FY24) & Win10 retirement (FY25), and (3) Intense pressure from suppliers/retailers & peers. We see DGW’s actions to capture such upside potential and also employ practices to mitigate downside risks (see Investment risks). 2018 2019 2020 2021 2022 2023E 2024F 2025F 2026F 2027F 2028F Revenue [VNDbn] 5,937 8,488 12,536 20,923 22,028 19,741 23,001 27,015 30,111 34,084 38,054 %Rev growth YoY 55.4% 43.0% 47.7% 66.9% 5.3% -10.4% 16.5% 17.4% 11.5% 13.2% 11.6% NPAT-MI [VNDbn] 110 163 267 655 684 359 566 811 1,012 1,194 1,380 %NPAT-MI growth YoY 39.6% 49.0% 63.8% 145.0% 4.4% -47.4% 57.4% 43.3% 24.8% 18.0% 15.5% Normalized EPS [VNDbn] 759 1,100 1,739 4,157 4,219 2,151 3,386 4,735 5,765 6,805 7,861 Dividend yield [%] 1.5% 1.0% 2.0% 2.0% 2.0% 1.2% 2.6% 3.7% 4.4% 5.2% 6.1% GPM [%] 6.2% 6.5% 6.4% 7.2% 7.5% 7.6% 7.8% 8.1% 8.2% 8.5% 8.7% NPM [%] 1.8% 1.9% 2.1% 3.1% 3.1% 1.8% 2.5% 3.0% 3.4% 3.5% 3.6% ROE [%] 15.0% 19.3% 25.7% 44.6% 32.5% 14.2% 19.7% 23.7% 24.7% 24.6% 24.2% ROIC [%] 7.0% 9.7% 15.8% 31.7% 19.6% 9.3% 16.2% 20.5% 22.4% 24.3% 25.9% Net D/E [%] 99.9% 52.9% -21.4% -21.2% 46.6% 14.5% 0.5% -7.4% -13.0% -22.3% -31.8% P/E [x] 17.5 12.1 7.6 6.4 11.2 21.9 13.9 9.9 8.2 6.9 6.0 P/B [x] 2.5 2.1 1.8 2.3 3.2 3.0 2.5 2.2 1.8 1.6 1.3 P/OCF [x] (15.3) 6.9 2.5 27.9 (6.9) 8.8 16.2 16.4 13.7 8.2 6.4 Football field valuation projection summary [VND] Source: Team analysis Share price performance Source: FiinProX, Team analysis Key events and catalysts Source: Team analysis 1-Jan-20 1-Jan-22 5-Dec-23 DGW VN-Index Historical return [%] DGW VN-Index Year-to-date (YTD) 37.7 10.8 1-year (1Y) 9.9 2.0 3-year (3Y) annualized. 36.7 3.0 Timeline Event Catalysts for DGW Q4 to Q1 Xiaomi’s new models release Higher Xiaomi revenue Q3 Back-to-school season Higher laptops revenue Q4 iPhone’s new model release Higher iPhone revenue Dec.FY23 2G shutdown starts Uplift in demand for low-mid- range smartphones H2.FY24 Vietnam’s economy fully recovers Higher consumer spending for all segments FY24-25 Replacement cycle of Smartphones & Laptops Increase in demand for Smartphones & Laptops Oct.FY25 Windows 10 retirement Higher demand replace old laptops FY27 Replacement cycle of Smartphones & Laptops Increase in demand for Smartphones & Laptops Scenario analysis Financial highlights RECOMMENDATION BUY Target price [VND] 63,900 Current price in [VND] 52,000 Upside potential [%] 22.9 Dividend yield [%] 2.6 Total shareholder return [%] 25.5 Market Cap [USD mn] 358.30 Shares outs [mn] 167.07 Free float [%] 55.00 Foreign ownership [%] 23.75 EPS FY22 [VND] 4,219 P/E FY22 [x] 11.2 Revenue driver Growth of existing brands, & adding new brands Cost driver Selling costs to promote newly- established brands 20,000 40,000 60,000 80,000 100,000 Target price VND63,900/share Closet price VND52,000/share DCF Scenario DCF Sensitivity SOTP P/S (*) Brokerage 52-w hi/low (*)P/S fwd SM & LT OE HA FMCG Pharma Bear 0.45 0.54 2.43 1.71 0.29 Base 0.41 0.43 2.08 1.55 0.22 Bull 0.32 0.41 1.80 1.31 0.15 VND/share Current Bear Base Bull DCF (FCFF) 52,000 48,900 64,000 82,200 SOTP P/S 46,500 63,700 79,700 Target price 47,700 63,900 81,000 Upside -8% 23% 56% TSR (+2.6% dividend yield) -6% 26% 58% Rating M-PF BUY BUY Risk/Reward 2.8 6.7 FY24 EPS growth [%] 14.9 57.4 80.0 FY24 ROE [%] 14.7 19.7 22.2 P/E fwd [x] 19.3 18.9 20.9 P/B fwd [x] 2.7 3.4 4.2 Source: Team analysis