Padini (PAD)’s quarter three financial year 2023 results met expectations. Earnings growth momentum should continue into quarter four financial year 2023 with Hari Raya Aidilfitri celebrations driving sales.
Into financial year 2024, Maybank Investment Bank Bhd (Maybank IB) expects PAD to remain a key beneficiary of consumer down-trading which will buffer potential earnings downside from weak consumer sentiment.
“No change to our earnings estimates. At 11x financial year 2024 estimate price-earnings ratio, PAD is trading at undemanding valuations, below mean price-earnings ratio of 15x. Our unchanged trading price of RM5.20 is based on the 15x financial year 2024 estimate price-earnings ratio (mean),” said Maybank IB in a recent report.
Quarter three financial year 2023 core net profit of RM43 million brought nine months financial year 2023 core net profit to RM166 million.
“The latter reflected 77%/80% of our/consensus full-year earnings estimates,” said Maybank IB.
A fourth interim dividend per share of 2.5sen was declared bringing year-to-date dividend per share to 7.5sen with a dividend payout ratio of 38%.
Quarter three financial year 2023 revenue grew 39% year-on-year on higher store footfall and consumer spending in the lead up to Chinese New Year. Gross profit margin also expanded to 40% given easing freight and raw material costs.
Higher labour costs however led to an ease in earnings before interest and tax margin. On a quarter-on-quarter basis, lower topline and bottomline growth was due to the seasonally higher sales base during the year-end Christmas and school holiday festivities.
Sequential earnings should remain on a positive trajectory with Hari Raya Aidilfitri celebrations spurring sales and store footfall. Maybank IB believes that PAD will be relatively shielded from the effects of softer consumer sentiment and inflationary pressures considering its product affordability and mass market appeal. As at end-Mar 2023, PAD has a net cash of RM628 million.
