Maybank IB has pointed out that Mr DIY’s 3Q23 results fell short due to higher-than-expected opex, it said the group’s sequential earnings should be seasonally stronger on higher festive spending but consumers’ propensity to spend may remain partially hindered by ongoing inflationary pressures.
The house is lowering the FY23E-FY25E earnings estimates by 5%-6%. Rolling forward the valuation base year to FY24, with TP maintained at MYR2.40 on a revised PER of 35x (-0.5SD to mean, 40x previously) to impute for overall weaker consumer spending trends in the medium term.
MRDIY’s 3Q23 core net profit of MYR124m (+23% YoY, -18% QoQ) brought 9M23 core net profit to MYR402m (+17% YoY), 70%/71% of our/consensus FY23E. A third interim DPS of 0.8sen was declared, reflecting a DPR of 61% (YTD: 2.2sen, DPR: 52%). The group has announced that its payout policy will be revised to no less than 50% of PAT against its previous DPR of 40%. Feeling the effects of slower consumer spending QoQ 3Q23 revenue contracted 3% QoQ in absence of festive spending and weaker spending amid subdued consumer sentiment. EBIT declined by a wider 15% QoQ from weaker product mix and higher depreciation & amortisation expenses. YoY, topline growth of +10% YoY was due to added contribution from new stores (+165 stores YTD) and higher transaction volume (+16% YoY), despite negative SSSG of -2.2% YoY and lower average basket size of MYR25.5 (-5% YoY). EBIT grew +24% YoY led by stronger GP margin (+3.9 ppts YoY) from increased prices and lower freight costs.
Reduce FY23E-FY25E earnings by 5%-6%
Factoring in the weaker set of results, Maybank IB’s is lowered, store expansion plans are also expected to ramp up in 4Q23 for MRDIY to achieve its FY23 store opening target (+180 stores YoY). In FY24E, MRDIY targets to open another +180 stores, and aims to reach a total of 2,000 stores across all its brands by 2028. Its automated warehouse is expected to be operational by 2Q24 with guided cost saving of c.MYR10m p.a.
Separately, MRDIY will be looking at M&A opportunities that provide operational synergies but details are scant at this juncture
