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MWG [BUY +84.0%] - Earnings to recover in 2023 on smaller loss at BHX - Update

- We cut our target price (TP) for MWG by 13% but maintain our BUY rating as the company’s share price has dropped ~31% over the last two months. 

- Our lower TP is due to (1) a 30% cut in our aggregate 2023F-2025F NPAT-MI as a result of our (2) weaker demand outlook for smartphones & laptops and consumer electronics, (2) lower assumption for average sales/store and thus lower profitability improvement for BHX, and (3) raising our WACC due to our higher equity risk premium (ERP), which are partly offset by rolling our TP horizon forward to end-2023.

- We forecast the sales growth of MWG’s key retail businesses TGDD, DMX and BHX to weaken in 2023 due to overall weaker consumer confidence amid an economic slowdown as we expect mass consumers to trade down and tighten spending.

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