Quick take: Mr DIY’s results below expectations

KUALA LUMPUR: Shares in Mr D.I.Y Group (M) Bhd fell marginally in early trade Friday after its earnings for the second quarter ended June 30 (2Q) missed analysts' estimates.

The home improvement retailer shed 4.31%, or 10 sen to RM2.22 at 9.49am. The counter has fallen about 8% so far this year.

Mr DIY’s net profit increased to RM135.19mil in 2Q from RM82.13mil while revenue jumped 38% year-on-year (YoY) to RM1.05bil from RM759.8mil.

Mr DIY declared a dividend of 0.6 sen per share for the second quarter, representing a payout of RM56.6mil.

Kenanga Research said Mr DIY’s 1H22 PATAMI of RM242mil came in below expectations at only 40%/44% of the house full-year forecast and full-year consensus estimate, respectively.

“YoY sales improved but margins eroded slightly on account of its strategic move to lock in prices in the first quarter. We expect improvement in margins in the coming quarters due to price adjustments but are cautious on topline for the second half of the year on inflationary concerns,” it said, adding that it expects gross profit margin to remain stable at circa 41% for the rest of the year.

Kenanga reduced its FY22E/FY23E earnings on Mr DIY by 16%/10%. It also downgraded the stock to “market perform” with a lower target price of RM2.40.

Meanwhile, RHB Research said Mr DIY’s 1H22 results slightly missed our lofty forecasts despite record 2Q22 earnings.

“Core net profit of RM242mil met 43% and 44% of our and consensus forecasts as we believe our previous costs assumptions were too optimistic.

“Post-results, we cut FY22F earnings by 5% and FY23F-24F earnings by less than 3%. Correspondingly, our discounted cash flow-derived target price is adjusted to RM2.90mil,” it said.

It added that the target implied 42x FY23F P/E, in line with the valuations it ascribed to other large-cap consumer peers.

RHB has maintained a “buy” call on Mr DIY with a new target price of RM2.90 from RM3.

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