MR D.I.Y. upgraded to ‘Buy' after strong 1Q earnings
KUALA LUMPUR: Investment banks were positive on MR D.I.Y. Group (M) Bhd, given its improved outlook after posting strong results for its first quarter ended March 31, 2025 (1Q 2025).
The group's 1Q 2025 net profit rose to RM174.15 million from RM144.88 million in 1Q 2024, while revenue jumped to RM1.26 billion from RM1.14 billion in the previous year.
In a note today, Maybank Investment Bank Bhd (Maybank IB) said further margin accretion may materialise in the financial year 2025 estimate (FY2025E) if MR D.I.Y. is in the position to negotiate for better prices with its China suppliers, combined with savings from favourable Chinese Yuan and the Malaysian ringgit.
'Our earnings estimates are unchanged, but we lifted the forward payout ratio assumptions to 75 per cent per annum (from 60 per cent).
'The overall uplift in disposable income, after the minimum wage was increased to RM1,700 per month (+RM200 per month, effective Feb 1, 2025), is also expected to sustain MR D.I.Y sales momentum in FY2025 positively,' it said.
Maybank IB added that it upgraded MR D.I.Y. to a 'Buy' call with a target price (TP) of RM1.85 and an unchanged price-to-earnings ratio of 24 times.
RHB Investment Bank Bhd (RHB IB) said MR D.I.Y's 1Q 2025 results are deemed within expectations thanks to a robust gross profit margin (GPM) expansion and same-store sales growth recovery (SSSG).
It said the rising wages and upsized government assistance packages to the lower-income groups are expected to lift disposable income and discretionary spending.
'This should benefit MR D.I.Y. as the beneficiaries of the above-mentioned measures fall well within its customer group.
'Meanwhile, the GPM upside should serve as another key earnings driver with 70 per cent of its cost of goods sold imported from China, whilst the tariff situation could render MR D.I.Y. more bargaining power,' it said in a separate note.
The investment bank opined that MR D.I.Y. is on the right track to expand its total addressable market to appeal to female and Gen Z consumers.
'This will be facilitated by the strategies to broaden its product portfolio by offering beauty and wellness, lifestyle, and fashion products as well as the KKV partnership,' it added.
RHB IB maintained its 'Buy' call on the counter with a TP of RM1.87 and a 12 per cent upside.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB) said MR D.I.Y. plans to add over 20 KKV stores in FY2025, citing strong performance.
In May 2024, MR D.I.Y. invested in a 49 per cent stake in Chinese retail brand KKV's operations in Malaysia.
HLIB said KKV stores generate three times higher monthly revenue than standard MR D.I.Y. outlets due to their premium product mix.
'We applaud the positive 0.6 per cent SSSG recorded during the quarter after seven consecutive quarters of negative SSSG.
'We remain optimistic on the group's strategy of store expansion to defend its market share as the leading home improvement retailer,' it said.
HLIB maintained its 'Buy' call on MR D.I.Y. with an unchanged TP of RM2.30.
'We remain optimistic about the group's strategy of store expansion to defend its market share as the leading home improvement retailer,' it added.
At 11 am, MR D.I.Y's share price rose by nine sen to RM1.76 with 15.23 million unit shares transacted.
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