According to Maybank IB the recent financial announcement by Mr DIY 4Q22 results met consensus expectations. FY23 outlook is set to improve with inventory and labour shortage issues alleviated. Earnings will also be driven by new store expansion while margin expansion is expected to materialise through recent product price adjustments and the absence of prosperity tax in FY23. Our FY23E-FY24E earnings estimates are lowered by 2%-3% upon adjusting for current operational run rates.
Gross profit margin expanded 3.4ppts YoY
Revenue grew 9% YoY in 4Q22 despite SSSG of -6.7% YoY largely due to added contribution from new stores. Maybank IB said it understands that the weaker SSSG YoY was led by the higher base comparison to 4Q21 where sales surged on pent-up demand following the ease in movement restrictions, and lower sales volume in certain product categories following the increase in product prices in 2Q and 3Q22. Gross profit (GP) margin increased by 3.4ppts YoY due to an average c.15% price increase to c.30% of its product range. That said, higher labour costs led to lower EBIT growth of 6% YoY while core net profit growth narrowed further to 1% YoY due to the adverse impact of the prosperity tax (FY22: MYR10.2m).
Well positioned to weather through uncertainties
Into FY23, the research house believes MRDIY is on steadier footing operationally given easing freight costs, raised product prices and continued ability to expand its store network. Inflationary pressures will be an ongoing dampener to consumer sentiment but the group’s product affordability and mass market appeal should cushion the effects of potentially softer consumer spending. Upon adjusting for current operational run rates, the FY23E/FY24E earnings are lowered by 3%/2% and introduce FY25E estimates.
