KUALA LUMPUR: RHB research is more confident over Power Root Bhd
's earnings prospects as its earnings recovery appears to be on track owing to new management initiatives to improve operations.
It raised its FY20F-22F net profit by 4-6%, which is broadly in line with guidance from Power Root's management.
"We like the stock for its earnings recovery momentum, generous dividend payout, and sturdy balance sheet.
"It is unjustifiably trading at 16.5x 2020F P/E, below sector average even after >30% YTD share price gain," said the research firm.
RHB reiterated a buy call on the counter with a new target price of RM2.06, which offers 21% upside plus 5% yield.
For FY20, RHB reported that Power Root's management is targeting 10% topline growth with contributions from both local and export sales driven by new product launches and continued restructuring in distribution and deal networks.
It added that the company is banking on a more effective tracking system to improve the efficiency of the orderings system and inventory management.
It also expects margin expansion underpinned by the favourable movement of key material prices while management remains prudent in advertising and promotion investment.
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