Friday 29 Mar 2024
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KUALA LUMPUR (May 3): Some analysts have revised up their target prices (TPs) and earnings forecasts for MR DIY Group (M) Bhd after its profit for the first quarter ended March 31, 2021 (1QFY21) beat their expectations.

UOB Kay Hian analyst Philip Wong said in a note today MR DIY’s 1QFY21 earnings beat the research house's expectations on the back of its resounding in-store sales and accelerated store expansion.

“We raise our FY21-23 revenue per store growth assumption to 15%/0%/2% from 10%/2%/2% previously and our net store addition assumptions to 200/190/170 from 175 a year previously.

“Our FY21-23 earnings forecasts are raised by 4%/8%/8% respectively. Key downside risks are a sharp weakening of the ringgit against the renminbi (yuan) and trade restrictions by China,” he added.

He maintained his "buy" call on the stock and revised up his target price (TP) to RM4.85 from RM4.

Wong noted that he continues to like MR DIY for its attractive three-year net profit compound annual growth rate (CAGR) of 30.2% estimated for FY20-23, its established track record, and with it being the largest home improvement retailer in Malaysia and home improvement spending in Malaysia being among the highest in the ASEAN region, as well as its highly cash-generative nature.

Meanwhile, RHB Research Institute analyst Soong Wei Siang said MR DIY's 1QFY21 results exceeded expectations for the second consecutive quarter on a stronger-than-expected sales growth.

“We foresee the proven business model and outlet expansion plan to sustain robust earnings growth momentum moving forward, notwithstanding challenges posed by the ongoing [Covid-19] pandemic,

“Buying interest should continue to be spurred by the market’s pursuit of quality and liquid large-cap consumer stocks as well as the stock’s imminent inclusion into the FBM KLCI,” he said.

Post results, he raised his FY21-23 earnings forecasts for MR DIY by 4% after imputing more aggressive sales growth assumptions.

He also forecasts that the company will chart an exciting three-year earnings CAGR of 28% moving forward.

He maintained his "buy" call on MR DIY and revised up his TP to RM4.71 from RM3.95.

“Risks to our recommendation include major supply chain disruption and a sharp rise in input cost,” he added.

Hong Leong Investment Bank (HLIB) Research analyst Syifaa’ Mahsuri Ismail, on the other hand, said MR DIY’s 1QFY21 core profit after tax of RM125 million matched her expectations.

“Post annual report adjustments, our FY21-22 forecasts are increased marginally by 1.9%/0.6%,” she added.

She maintained her "buy" call on MR DIY with a higher TP of RM4.79 (from RM3.81) based on a higher price-earnings multiple of 50 times (from 40 times) pegged at estimated FY22 earnings per share (EPS).

“With the encouraging start, we reckon MR DIY will be able to surpass its target of 175 new stores in 2021 across three existing brands.

“Furthermore, based on the last closing price of April 30, 2021, the implied market capitalisation ranked MR DIY as the 20th largest market cap company [on Bursa Malaysia]. We opine that the premium is justified to account for its possible inclusion into the KLCI,” she said.

Meanwhile, AmInvestment Bank Research maintained its earnings forecasts and TP for MR DIY. It kept its "buy" call on MR DIY, with an unchanged TP of RM4.48.

It noted that MR DIY’s 1QFY21 net profit of RM125 million came within its and consensus expectations, making up 24% and 25% of the full-year forecasts respectively.

“While MR DIY’s faster-than-expected store openings are likely to provide a positive earnings contribution, we are wary of the lacklustre performances of MR DOLLAR and MR TOY, as well as a possible retightening of pandemic restrictions in light of the recent spike in [Covid-19] cases,” it said.

At the time of writing today, MR DIY had fallen 10 sen or 2.51% to RM3.89, valuing the group at RM25.04 billion.

Edited ByJoyce Goh
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