ICT firms to rebound in H2

A worker loads products in a warehouse at Digiworld. — Photo courtesy of digiworld.com.vn

HÀ NỘI — Retail enterprises were expected to hit bottom profits in the first half of the year, and there are more positive factors supporting the industry’s recovery prospects in the future, according to experts.

Due to low demand and weak purchasing power, the retail industry, especially the communication and technology (ICT) industry, continued to record another challenging quarter from April to June.

Most businesses in the industry recorded sharp falls in profits compared to the same period last year, even FPT Retail (FRT) set a record loss.

Since the end of last year, the profits of retail businesses have been under pressure due to numerous issues.

Escalating inflation weighed on consumers' disposable income, forcing them to cut non-essential spending, while higher interest rates and a tighter credit environment further pressured non-essential consumption.

Moreover, the price war that broke out at the beginning of the second quarter made the situation even more difficult.

"In the first half of the year, the ICT retailers faced many difficulties because the demand for the products decelerated significantly and the battle for market share became fiercer. This has negatively affected the business results of ICT retail enterprises," Lê Xuân, an independent trader, told Việt Nam News.

However, signs of profit-bottoming have also appeared.

Even though it participated in the price war, Mobile World Investment Corporation’s profit, in absolute terms, did not drop too deeply in the second quarter compared to the first quarter of the year.

Meanwhile, Digiworld posted the most optimistic results, as its profit in the second quarter grew 6 per cent over the first quarter.

In its recently released retail industry analysis report, SSI Research said that the profits of most retail businesses (in absolute terms) were likely to hit bottom in the first half of 2023 and were on track to recover.

Maybank Securities (MSVN), in a recent report, highly appreciated Digiworld’s business for its ability to recover profits amid the price war among retailers in the information technology sector.

The securities firm believes that Digiworld has strengths in distributing ICT products and is in the process of horizontal expansion to other potential segments, including home appliances, consumer goods, healthcare, and industrial equipment.

The expansion provides significant room and sustainable drivers for Digiworld's long-term growth, while benefiting from growing demand and digital transformation.

Digiworld witnesses a relatively stable profit compared to other ICT retailers in the current challenging business environment, and the company is expected to recover in the second half of 2023.

According to MSVN, thanks to its wide distribution channels, Digiworld is less affected by the fierce price war for consumers among retailers, with Apple and Xiaomi products being the main contributors to Digiworld.

Brighter future in second half

Despite difficulties, the retail industry still received positive support from macro policies.

The National Assembly has agreed to reduce value-added tax (VAT) by 2 per cent for goods and services that are applying the VAT rate of 10 per cent. The application date is from July 1 to the end of 2023.

At the end of April, the Government also issued a resolution on solutions to support and remove difficulties for borrowers to serve their daily lives and consumption needs.

Meanwhile, lending rates of commercial banks has reduced gradually, which has partly helped businesses ease their interest burden, creating more room for demand-stimulating promotions.

Low interest rates also stimulate consumer demand for the ICT group, an area with a high rate of financial leverage.

In the second half of the year, when the policies’ impacts are clearer, the recovery momentum of the group is forecast to be more pronounced.

The ICT retail group will benefit from the third quarter onwards when the back-to-school season will stimulate the demand for items such as computers, laptops, and tablets.

In addition, Apple is expected to launch the iPhone 15 model in mid-September, which is also expected to be a boost for the group.

In a recent report, MSVN said that, despite the ongoing economic downturn, the seasonal pattern of consumption will continue this year, helping to underpin the economic recovery in the second half of 2023.

At a recent conference on the consumer goods industry, Đoàn Hồng Việt, Chairman of Digiworld's Board of Directors, said that in June, the company achieved the highest monthly revenue since the beginning of the year, and estimated revenue in July is even higher.