Retail sector sees sharp profit Increases in Q2

Retail sector surge

The retail sector is expected to see profit growth of up to 379% from a low base in the same period.

• Technology and home appliances retail: Companies in this sub-sector have recorded slower growth, mainly due to increased demand for air conditioners during the hot weather. However, their net profits have still improved significantly due to the low base last year.
• Jewelry retail: This sub-sector also shows growth, with fluctuating gold prices boosting the demand for gold jewelry transactions. Revenue is expected to increase by about 12%.
• Pharmaceutical retail: The expansion of pharmacy chains is expected to drive strong revenue growth. The Long Châu pharmacy chain plans to open 83 more stores, bringing the total to 1,670, helping to increase revenue by 34%. The retail revenue of listed pharmaceutical companies is expected to grow by about 57%.

Basic materials recovery

Companies in the basic materials sector are also forecasted to grow by 63% compared to the low base last year. The standout performers are in the steel industry.

• Steel industry: This group shows significant profit recovery as raw material prices cool down. Coal and ore prices have dropped by 18% and 20% respectively year-on-year, while steel prices have only decreased by 7%, helping to raise the gross margin to an average of 12%, much higher than the 5% level of 2023.

MBS forecasts that raw material prices may remain low due to stable supply and significantly reduced raw material inventory demand in China. Additionally, improved domestic consumption output amid a recovering domestic demand scenario could continue to maintain a positive trend as the real estate supply is expected to increase in the second half of the year. Steel companies may also increase prices in Q3.

Banking sector

Banking sector profits are forecasted to grow by 12% in Q2/2024, higher than the market average but slower than the 14% growth in Q1.

• NIM pressure: The Net Interest Margin (NIM) of the entire sector is expected to continue to be under pressure as lending rates are forecasted to decrease further while deposit rates have increased slightly at most banks.
• Credit growth: Q2/2024 credit growth is likely to be better than Q1 but still lower year-on-year, so net interest income of banks cannot increase significantly. Non-interest income remains bleak and has not recovered as it mainly relies on fee collection and debt handling. Foreign exchange business operations with securities are forecasted to not see high growth amid increasingly difficult market conditions.
• Provision costs: Provision costs will continue to increase as bad debts show signs of rising in Q2. MBS believes that rising bad debts and decreasing bad debt coverage ratios will be a common trend across the industry.

MBS assesses that post-tax profits of banks will not grow significantly, with outstanding growth in some banks with good credit growth like LPBank, VPBank, and HDBank. Some banks may see a decrease in post-tax profits compared to the same period, such as Sacombank and BIDV.

Oil and gas sector

The oil and gas sector shows a divergent outlook with more positive forecasts for upstream companies. PVD and PVS may record good profit growth compared to the same period as the workload increases. Midstream companies like PVTrans are expected to see flat profits as freight rates do not increase significantly year-on-year and the fleet expansion is not as fast as anticipated. In the downstream sector, Petrolimex’s profits may remain flat from a high base last year. Meanwhile, BSR may be negatively affected in terms of output and profits due to plant maintenance in Q2.

Real estate sector

Real estate is one of the sectors with the poorest profit outlook in Q2. The residential real estate group has not seen a breakthrough due to a lack of projects for handover and unchanged legal status of projects. Factors such as interest rates and reduced sales costs will partially support Q2 profits. The sector's net profit is likely to remain flat mainly thanks to Vinhomes, which has ongoing handover projects with clear legal status and surrounding infrastructure development.

Excluding Vinhomes, the picture worsens significantly. Some companies may see a 50-70% decrease in profits compared to the same period, such as Khang Điền House and Đất Xanh due to a sharp decline in project handover revenue. The land and resort real estate segments will recover more slowly in the near future due to speculative nature and many legal issues.

Source: MBS, theleader

Compiled by VBI