RHB Investment Bank has maintained a “Buy” recommendation for Mr DIY Group (M) Bhd with a target price of RM4.59, 29 % upside with 1% yield. Mr DIY’s 9M21 results marginally trailed expectations, dragged down by the prolonged lockdown in 3Q21.
It says that earnings should recover sharply in 4Q21, thanks to the lifting of movement restrictions, post-lockdown pent-up demand, and year-end seasonality.
RHB says that it would 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.
The encouraging recovery momentum in September should sustain into 4Q21, considering the broader reopening of the economy and the ease in movement restrictions.
RHB also says that this bodes well for all the outlets in shopping mall locations as well as Mr Toy stores that were not allowed to operate for most parts of the lockdown.
“In addition, the store expansion plans have also resumed progressively since end-3Q21, and Mr DIY is confident of achieving its FY21 target of opening 175 new stores,” it says.
RHB said that as such, it anticipates a sharp earnings recovery in 4Q21, also taking into consideration the post-lockdown pent-up demand and favourable year-end seasonality. “Our new forecast points to a >50% QoQ jump in 4Q21 core net profit,” RHB says.
