Kuala Lumpur (November 9): Analysts cut their target prices (TPs) for MR DIY (M) Bhd after its third-quarter earnings ended September 30, 2022 (3QFY2022) missed expectations.
Saifa Mahsuri Ismail of HLIB Research reduced her total earnings by 17.8% to RM 2.40 from RM 2.92 previously, while maintaining her “buy” option, after cutting her price earnings to 35 times earnings per share by 6.9 years for the fiscal year. Ended December 31, 2023 (fiscal year 2023).
She noted that MR DIY has opened 138 new stores and is on track to exceed its goal of 180 stores for the 2022 fiscal year.
“Despite the healthy expansion of stores, the group continues to see a significant increase in input costs mainly in freight charges and staff costs.
“Operating expenses increased 2% year-over-year on the back of a 1.2 percentage point increase in wage costs with the implementation of the RM1,500 minimum wage. To mitigate the impact, the group is exploring several key operational and strategic initiatives including pricing, reviewing its product ranges, and improving the mix products as well as automate and simplify operating processes.
“We have trimmed our forecast for fiscal year 2022/2023/2024 by 11%/6%/6%, respectively, to take into account the aforementioned deviation,” she said.
Meanwhile, RHB Research’s Soong Wei Siang cut MR DIY’s TP profit by 9.7% to RM2.62 from RM2.90, while also maintaining a “buy” call.
MR DIY results for the nine months ending September 30, 2022 (9MFY2022) are disappointing mainly due to weaker-than-expected sales momentum and discontinued GPM [gross profit margin] recover. However, we believe earnings are well positioned for an immediate recovery in Q4 2022 due to seasonality and GPM normalization, with their solid fundamentals intact. “We continue to love the stock as an acquisition agent for flexible consumer spending in Malaysia thanks to its well-established network of stores and strong brand equity,” he said in a note on Wednesday (November 9).
He added that there could be a strong profit rebound in the fourth quarter, the strongest of the season thanks to festivities and the long year-end holidays.
Meanwhile, GPM is also set to expand by an estimated 1.5-2.0 percentage points starting in the fourth quarter of 2022 taking into account the latest round of price adjustments through the end of the third quarter of 2022 and the decline in freight rates. After the immediate term , management is committed to 180 new store openings (125 MR DIY, 35 MR DIY Express, 20 MR Toy and MR Dollar) for fiscal year 2023 as it believes its business model will be able to thrive with a greater degree of intensity and MR DIY Express is expected to pick up more of growth opportunities,” he said.
On Tuesday, MR DIY announced that its net profit for the third year of fiscal 2022 rose 11.99% to RM101.18 million from RM90.35 million a year earlier, on the back of a 25.8% increase in revenue to RM966.17 million from RM768.02 million. Malaysian.
The group indicated that its net profit for the quarter was hampered by administrative expenses of RM37.6 million (up 39% YoY) and other operating expenses of RM214.7 million (up 38.7% YoY).
“This was mainly due to business expansion activities, which resulted in increased staff costs, utility expenses, marketing expenses for promotional activities, as well as amortization of right-of-use assets, in line with the growth in the number of stores,” MR DIY said in a filing with Bursa Malaysia .
MR DIY said it will continue to conduct price reviews to address ongoing input cost pressure.
At the time of writing, MR DIY is unchanged at RM1.98, giving it a market capitalization of RM18.67 billion.
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