- We attended MSN’s online analyst meeting on August 2, 2021, in which management provided more details on the company’s H1 2021 business performance and near-term outlook. Overall, management guides for improvements in terms of both growth and profit margins in H2 2021 vs H1 2021 and expects MSN’s 2021 NPAT-MI to lean toward the higher range of its AGM guidance of VND2.5tn-4.0tn (USD109mn-174mn).
- The key takeaways from the meeting reinforce our current bullish view on MSN, which is centered on its consumer-driven businesses (FMCG, fresh meat and grocery retailing) that we believe share meaningful synergies. Rising metal prices that will benefit Masan Hi-Tech Materials (MHT) further add to our conviction. Below are our more detailed takeaways.  

MSN: Revenue and earnings growth to accelerate in Q3 2021 — in line with our expectations. For 9M 2021, Masan preliminarily guides for revenue of ~VND68tn (USD3bn; +22% YoY) and NPAT-MI of VND2.2tn (USD96mn) vs estimated recurring NPAT-MI of only ~USD5mn in 9M 2020. This guidance implies Q3 2021G revenue of ~VND27tn (USD1.2bn; +33% YoY) and NPAT-MI of VND1.2tn (USD53mn) vs negligible recurring NPAT-MI in Q3 2020. Masan’s preliminary 9M 2021 targets are broadly within our expectations — pending a fuller review — as they are equivalent to 73% of our full-year revenue forecast and 69% of our full-year NPAT-MI forecast. 

Masan Consumer Holdings (MCH): Strong demand for packaged foods buoys revenue. Management expects MCH’s top line to grow ~48% YoY in Q3 2021 (H1 2021: 12% YoY) as the current COVID-19 situation is elevating at-home consumption demand for convenience foods, seasonings and processed meat despite its negative impact on beverage consumption. Meanwhile, management expects Q3 2021’s EBITDA margin to be close to Q2 2021’s level of ~24%.  

VCM (grocery retailing): Eyeing positive 1% EBIT margin in H2 2021 vs -3.6% in H1 2021. This upbeat profitability guidance is premised on (1) robust sales/store — especially for the VinMart+ minimart format — thanks to consumers stocking up on essential goods, increasing consumer concern for safety and hygiene, and closures of wet markets; (2) continued negotiations with suppliers to yield better commercial margins; (3) continued cost optimization efforts such as those related to store operations and the supply chain; and (4) profit contributions from integrated Phuc Long kiosks (coffee & tea for delivery/takeaway). This EBIT guidance beats our current projection for a small operating loss in H2 2021. 

Per Masan, 2,054 VinMart+ stores (or 91% of VinMart+ store count) were EBITDA positive in June 2021 vs only 827 stores in June 2020. In addition, VCM’s revenue/sqm in July 2021 improved vs June 2021.

The roll-out of Phuc Long kiosks is showing promising results as a Phuc Long kiosk lifts its corresponding VCM store’s EBITDA margin by around four ppts on average, per management. A new Phuc Long kiosk in Bac Giang Province — a second-tier province in the North — is seeing early strong sales, which bodes well for VCM’s plan of expanding Phuc Long kiosks to other cities and provinces in addition to HCMC and Hanoi. Masan expects to reach a total of 80-100 Phuc Long kiosks by the end of August 2021 vs 41 kiosks as of end-June 2021.   

Masan Meat Life (MML): Feed margins to rebound; meat sales to accelerate. In light of recent corrections in prices of raw materials such as corn and soybeans, Masan expects feed EBITDA margins to revert to 2020’s levels of ~12% from H1 2021’s single-digit level. Meanwhile, Masan targets to raise the utilization rate of its meat processing plants to ~25%-30% in Q4 2021 vs ~11% currently. Accordingly, management expects integrated meat revenue to reach USD200mn-300mn in 2021, which is in line with our current projection of ~USD250mn. 

MML’s meat business is showing meaningful synergies with VCM as MML’s meat products are playing a central role in VCM’s fresh food-focused strategy while leveraging VCM’s store network to reach consumers. As of June 2021, MML’s Meat Deli (pork) and 3F Viet (chicken) products are available at ~2,300 and ~2,200 VCM stores, respectively, accounting for ~50% of VCM’s meat sales.

MHT: Higher tungsten prices, realization of copper sales to bolster H2 2021 performance. Current tungsten APT prices have surpassed USD300/mtu vs USD230/mtu as of YE2020. These price increases along with a firmer tungsten sales volume and expected monetization of copper inventory (vs no copper sales in H1 2021) will bolster MHT’s EBITDA to reach ~USD140mn in 2021 (per management’s estimate), which is more than double 2020’s USD62mn and slightly ahead of our current 2021 projection of USD132mn. According to Masan, its current copper inventory is worth ~USD80mn and it is optimistic that it will secure a domestic sales channel given Vietnam’s copper export restrictions.