Earnings Report /
Vietnam

Haxaco: 1Q2020 – Covid-19 is challenging HAX's business

  • The net revenue in 1Q2020 was VND 920 billion, down by 15% YoY.

  • 2020 Outlook: Revenue and profit will decline.

  • We value HAX's target price at VND 12,400/share combining with cash dividend, suggesting 18% upside.

Vu Tran
Vu Tran

Oil & Gas, Fertilizers

Follow
Rong Viet
25 May 2020
Published byRong Viet

Hang Xanh Motors Service (HAX) net revenue in 1Q2020 was VND 920 billion, down by 15% YoY. Revenue of selling cars dropped by 17% YoY, to VND 824 billion. The negative impact of the slowdown of the economy and consumers’ behavior were the main reasons. On the contrary, the revenue of repairing and selling spare parts continued the grow in 1Q2019 (+23% YoY), as climbing by 12% YoY, reaching VND 94 billion.

Gross profit margin (GPM) of 1Q2020 improved from 3.8% (1Q2019) to 5.3%. While the GPM of selling cars increased from 3.2% (1Q2019) to 4.7%, the GPM of the repairing and selling spare parts segment decreased sharply from 13.1% (1Q2019) to 10.1%. Gross profit in 1Q2020 was VND 49 billion, up by 18% YoY.

Total costs including interest, selling and G&A expenses did not change much compared to the same period last year. However, other incomes (mostly selling incentive) dropped significantly by 63% YoY, to VND 6 billion. Therefore, net income was only VND 3.2 billion, down by 30% YoY.

2020 Outlook: Revenue and profit will decline

We expect HAX to have a net revenue of VND 4,551 billion (-12% YoY) and VND 63 billion in PBT (-4% YoY) in 2020.

Car sale revenues are expected to decline by 14%, to VND 4,123 billion. We think that HAX will sell 2.158 cars and the selling prices will remain unchanged while the GPM will go up from 2.7% to 3.6%. Thus, the gross profit of this segment will be VND 148 billion, up 14% YoY. In terms of repairing and selling spare parts, the revenue is expected to increase by 14% YoY, to VND 419 billion while gross profit will drop by 12% YoY, to VND 58 billion. Total costs including selling, G&A and interest expenses will be VND 226 billion, unchanged compared to the same period last year. However, other incomes will fall by 15% YoY, to VND 81 billion. Hence, PBT will decline by 4% YoY, to VND 63 billion.

Valuation and recommendation

We believe that 2020 will be a difficult year for HAX due to the negative effect of the Covid-19 epidemic which makes buyers be hesitate on making decisions. That will reduce car sales and the sale incentive in 2020. As a result, the company's profits will be lower compared to 2019. But the dividend rate of 15% is fairly interesting for long-term investors.

We value HAX's target price at VND 12,400/share combining with cash dividend, that is 18% higher than the closing price on 22/05/2020. We recommend to ACCUMULATE this stock.