Date: October 17, 2024
Broker: CGS International Securities
Strong SSSG Growth and Expansion Strategy
Moshi Moshi Retail Corp (MOSHI) is expected to post strong Same-Store Sales Growth (SSSG) of 5.7% in Q3 2024, rebounding from previous disruptions. The SSSG is projected to soar above 30% in Q4 2024, driven by a successful collaboration with K-pop group NCT Dream. The company has resolved earlier supply issues and has seen significant improvement, with sales growth moving from low single-digit negatives in July to double-digit gains in August and high single digits in September.
Successful Collaboration with NCT Dream
The collaboration with NCT Dream has been a major factor in boosting sales, with a new collection set to launch on October 19, 2024, anticipated to further enhance Q4 performance. The positive reception to these special product lines highlights MOSHI’s ability to leverage strategic partnerships to drive growth, even without special product lines, with an expected Q4 SSSG around 10%.
Aggressive Store Expansion Plans
During an analyst meeting on October 17, 2024, MOSHI announced plans to increase new store openings, raising their 2025 target from 30 to 40 stores, following a revision of their 2024 target from 33 to 34. This aggressive expansion strategy signals a stronger growth trajectory for the company, though there are potential risks regarding the availability of prime rental locations. Despite this, MOSHI remains committed to expanding its footprint, with 10 locations already secured for 2025.
Financial Performance and Projections
MOSHI’s estimated net profit for Q3 2024 is THB 109 million, reflecting a 34% year-on-year increase. This growth is attributed to solid SSSG of 5.7% and a 70 basis point improvement in gross margin, which rose to 53.8%. The company also benefited from a 250 basis point increase in wholesale margins, thanks to a higher import mix. The retail margins saw a slight dip due to changes in sales mix and warehouse sales at the end of September.
The company’s strategy of tight cost control continues to yield benefits, with the SG&A/sales ratio expected to decline by 30 basis points year-on-year, down to 33.7% for Q3 2024. Economies of scale and reduced marketing costs, especially for popular collaboration products, contribute to this cost efficiency.
Continued Growth Expectations for FY25-26
CGS International maintains an “Add” rating for MOSHI, with an unchanged target price of THB 54.75, based on a P/E of 27.2x FY26F. The company is viewed not just as a recovery play following supply disruptions in the first half of 2024 but as a compelling growth story for the upcoming years. The ambitious store expansion plan is expected to be a key driver for growth, alongside increasing distribution opportunities through networks like 7-Eleven.
ESG Initiatives and Commitments
MOSHI is committed to environmental, social, and governance (ESG) principles, focusing on reducing carbon emissions, enhancing employee well-being, and improving supply chain management. The company has initiatives to minimize plastic use, introduce biodegradable alternatives, and promote sustainable packaging. Despite ongoing challenges in eliminating plastic waste, MOSHI’s efforts towards sustainability reflect its long-term commitment to environmental responsibility.
In 2023, MOSHI made significant progress in reducing greenhouse gas emissions, social initiatives like increasing training hours and improving employee satisfaction, and strengthening governance with robust supply chain practices. Future ESG goals include achieving net zero greenhouse gas emissions by 2050 and expanding sustainable practices across its supply chain.
Risks and Potential Catalysts
Key risks to MOSHI’s growth include increased competition and challenges in executing its aggressive expansion plans. Securing prime rental spaces remains a concern due to high demand in top-tier locations. However, MOSHI could see a re-rating if it successfully accelerates store rollouts and scales up distribution through strategic networks.
Conclusion
Moshi Moshi Retail Corp is positioned for strong growth in the coming quarters, driven by strategic partnerships, aggressive expansion, and effective cost management. With solid financial projections and a commitment to sustainability, the company is set to continue its upward trajectory, making it an attractive prospect for investors.
