KUALA LUMPUR: Research houses are optimistic about Mr DIY Group Bhd’s projection of a stronger 2023 fourth quarter (Q4 FY2023) growth, especially after posting a solid financial result for the third quarter that ended September 30, 2023 (Q3 2023).
The home improvement retailer posted a 22.5% increase in its net profit for the Q3 FY2023 to RM123.95 million from RM101.18 million last year.
Meanwhile, the group’s quarterly revenue climbed 10.4% to RM1.07 billion versus RM966.17 million previously in Q3 FY2022, driven by contributions from new stores.
Looking at the strong financial outlook, RHB Investment Bank Bhd maintained its “buy” call on Mr DIY with a target price (TP) of RM2.29.
In a statement, RHB Investment said it expects Mr DIY to see a sequential pick-up in the fourth quarter of 2023 (Q4 FY2023) sales, boosted by stronger seasonality on the back of the year-end festive season and school holidays.
“In addition, the company has lined up several marketing campaigns to stimulate consumer spending and drive traffic to its stores, taking advantage of the gross profit margin (GPM) expansion,” it said.
The group’s GPM rose to 45%, up 3.9 percentage points year-on-year from 41.1% in Q3 FY2022.
Meanwhile, Kenanga Research also maintained its “outperform” rating on Mr DIY due to its impressive GPM, five-year expansion plan to bring its store count to 2,000, the introduction of new formats and brands, and exploration of acquisitions.
“We like Mr DIY for its vigorous store expansion strategy aimed at broadening its national footprint and the impending initiation of an automated inventory system in the first quarter of the financial year 2024 (Q1 FY2024), which could further enhance its operational efficiency,” it added.
Kenanga Research maintained Mr DIY’s financial year 2023 forecast (FY23F) numbers but raised its FY24F earnings forecast by 11%.
“We lift our TP by 7% to RM1.78 from RM1.67,” it stated.
AmInvest also retained its “buy” call on Mr DIY with an unchanged discounted cash flow-derived (DCF) TP of RM2.60.
“We continue to ascribe a neutral ESG rating of 3 stars to DIY,” it said.
The research house continued to favour DIY as its robust revenue growth will be driven by ambitious store network expansion plans and a better product mix by introducing new stock-keeping units (SKUs) to cater to the needs of the affordable market segment.
As at 12.21pm, Mr DIY’s share price fell five sen or 3.11% to RM1.56, giving it a market capitalisation of RM14.73 billion.