POWER Root Bhd is looking at stronger earnings ahead following the post-movement control order (MCO) normalisation, with the group to focus on the digital platform, according to RHB Investment Bank.
This follows the group’s results for the first quarter of its 2021 financial year, ended June 30. Power Root saw a core net profit of RM10.7 mil, a dip of 16.4% year-on-year (yoy), and reaching 19% of RHB’s full year forecasts.
The group also saw a 32.2% plunge in domestic sales yoy, but export sales remained steady after contributing 12.2% in sales growth. Power Root also declared a dividend of 2.5 sen.
“The softness in the 1QFY21 results does not alter our outlook for the group. Essentially, sales have normalised from June, following the relaxation of MCO measures.”
“Moving forward, we believe consumption will remain robust, given the resilient nature of Power Root’s products and established branding,” said RHB analyst Soong Wei Siang.
The analyst also noted that the new normal of consumers spending more time at home could also spur demand for fast-moving consumer goods. However, new product launches could face challenges, as consumers will likely turn down samples offered during product tasting sessions.
“Hence, we expect the company to tweak its marketing strategy and focus more on the digital platform. Its cost optimisation initiative will continue, as management sees further room for improvement, and we expect this to drive margin expansion ahead,” said Soong.
RHB maintains a buy call on Power Root, with a target price of RM2.80.
At the end of the trading day, Power Root’s shares were last done at RM2.21, up a sen, with 1.3 million shares traded. – Aug 27, 2020
