MR DIY on recovery path
PETALING JAYA: MR DIY Group (M) Bhd will likely see a recovery in its financial results as the headwind from the Omicron wave has now subsided.
The improvement in its performance is also expected in the coming quarters with the full reopening of the economy and the boost in disposable income resulting from the increase in minimum wages.
According to Hong Leong Investment Bank (HLIB) Research, the ending of its “price lock” campaign may subsequently see gradual price increase across different product categories.
“We gather that the group’s strategy of clawing market share with ‘price lock’ campaign in ‘Harga Kami Tetap Sama’ has garnered positive feedback from the consumers,” the research house said.
Commenting on MR DIY’s recently reported first quarter results for the financial year 2022, HLIB Research said it was broadly in line with its expectation at 18% and 16% of consensus forecasts.
“We deem this to be broadly in line as we expect the results to chart recovery in the subsequent quarters, given further easing of restrictions from economic reopening,” it said.
HLIB Research reiterated its “buy” call on MR DIY, with a lower target price of RM4.38 compared with RM4.51 previously.
“We expect the steady store expansion and omni-channel strategy with the online and Touch ‘n Go collaboration to shore up the company’s profitability in line with the clearer recovery picture,” the research house said.
Meanwhile, UOB Kay Hian Research (UOBKH) said MR DIY’s performance in the recent quarter was below its expectation at 15% of full-year earnings forecasts.
It expects that as foot traffic is restored alongside staple purchases and ensuing normality, the company should command its usual revenue store generation after the recent hiccup due to the Omicron wave.
“In addition, we believe consumer spending may have been diverted to consumer services and goods that were not readily accessible during the pandemic,” UOBKH Research said.
The research house also noted that its first-quarter earnings before interest, taxes, depreciation and amortisation margins had slipped by 3.9 percentage points year-on-year to 23.3%.
“This is attributed to higher input cost, freight cost, MR DIY’s ‘price lock’ campaign and product mix due to MR Dollar. Given the slump in same-store sales growth, operating margins deteriorated further,” UOBKH said.
“Positively, the company has since adjusted its average selling prices and should see its gross margins revert back to its target gross profit margin range of 40%-45%, going forward,” it added.
UOBKH Research maintained its “buy” call on MR DIY but with a lower target price of RM3.75 from RM4.85 previously as it cut its earnings and lower its price-to-earnings ratio (PER) peg.
“Our target price is now based on a PER pegged of 41 times based on 2022 earnings.