MR DIY Group (M) Bhd is on course for a rebound from its 9M FY2021 results which “marginally trailed expectations” after being dragged down by the prolonged lockdown in 3Q FY2021.
RHB Research expects the encouraging recovery momentum in September to sustain into 4Q FY2021 considering the broader re-opening of the economy and the ease in movement restrictions.
“This bodes well for all the outlets in shopping mall locations as well as MR TOY stores which were not allowed to operate for the most parts of the lockdown,” opined analyst Soong Wei Siang in a results review.
“In addition, the store expansion plans have also resumed progressively since end-3Q FY2021 with MR DIY is confident of achieving its FY2021 target of opening 175 new stores.”
As such, RHB Research expects a sharp earnings recovery for MR DIY in 4Q FY2021 after considering the post-lockdown pent-up demand and favourable year-end seasonality.
“Our new forecast points to a >50% quarter-n-quarter (qoq) jump in 4Q FY2021 core net profit,” projected the research house.
“We continue to like MR DIY for its gravity-defying growth, anchored by entrenched brand equity and a proven business model. Outlet expansion is sustainable, underpinned by market share gains and under-penetration in Malaysia’s home improvement market.”
According to the research house, MR DIY’s core net profit of RM297 mil (+28% year-on-year) met 65% of both its and consensus forecasts.
The negative deviation could be attributed to a slower-than-expected return in footfall stemming from the prolonged lockdown in 3Q 20021.
“Post-results, we trim FY2021F earnings by 4%, but make no material changes to FY2022-2023F profits,” justified RHB Research.
All-in-all, RHB Research retained its “buy” rating on MR DIY with a discounted cash flow (DCF) target price of RM4.59 which is inclusive of a 4% ESG (environmental, social and governance) premium.
“The target price implies 48 times P/E (price-to-earnings ratio) FY2022F in line with the valuation we ascribed to other large-cap consumer peers,” added the research house.
At 10.17am, MR DIY was up 11 sen or 3.09% to RM3.67 with 1.07 million shares traded, thus valuing the company at RM23.03 bil. – Nov 3, 2021
