- We raise our target price (TP) for FRT by 6% and maintain our OUTPERFORM rating.

- Our higher TP is mainly due to our upward revision of pharmacy chain Long Chau’s (LC) equity valuation by 8% due to raising our aggregate EBIT in 2028-2032F by 15%, which is partly offset by (1) our higher projected capital expenditure and working capital in 2023-2032F and (2) LC’s higher net debt at YE2022.

- LC is the largest modern pharmacy chain in Vietnam in terms of scale and has the highest EBIT margin (1.5% in 2022). We expect LC will widen its GPM by 100-150 bps p.a. by opening 400 stores in 2023 and an additional 200-300 stores p.a. over the next four years. We raise our projected GPM/NPM in 2029F by 6 ppts/40 bps to 30.6%/4.0%, which are broadly line with the five-year average median GPM/NPM of Asian regional peers of 30.8%/4.2%, respectively. We forecast LC to contribute ~45% to FRT’s aggregate NPAT-MI 2023-2025F vs 12% in 2022.

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