CIMB Research said Padini anticipates a gradual benefit from the strengthening of the ringgit, particularly against the Chinese yuan, in coming quarters.
PETALING JAYA: Padini Holdings Bhd
expects earnings for its upcoming fourth quarter ending June 30, 2025 (4Q25) to come in weaker both quarter-on-quarter (q-o-q) and year-on-year (y-o-y) as festive-related purchases had been largely front-loaded in 3Q25, owing to the earlier timing of Hari Raya.
In 3Q25, the owner and operator of fashion retail outlets saw revenue grow by 8.9% y-o-y and 19.3% q-o-q primarily due to festive-driven demand in conjunction with Chinese New Year and the earlier timing of Ramadan.
During an analysts’ briefing, its management also shared that gross profit margins also lifted due to product mix improvements.
However, in the upcoming quarter, lower operating leverage from softer sales may impact margins, although CIMB Research said Padini anticipates a gradual benefit from the strengthening of the ringgit, particularly against the Chinese yuan, in coming quarters.
Notably, over 50% of its products are sourced from China.
According to the research house, Padini has not committed to any firm new store targets for 4Q25 and for the financial year 2026 (FY26). This is because any expansion will depend on location suitability and commercial viability.
“Nevertheless, we have factored in 11 new store openings annually into our FY25 to FY27 earnings projections (versus nine net new stores in FY24,” CIMB Research said in a report yesterday.
It said Padini remains confident of consumer demand, supported by its efforts to enhance product appeal and value-for-money offerings targeted at the mass market.
“Maintain ‘buy’ rating and target price of RM2.55, based on a 14 times 2026 price-to-earnings, which is in line with its 10-year mean,” said CIMB Research.
It noted Padini’s strong net cash position of RM836mil as at end-3Q25.
Meanwhile, Maybank Investment Bank Research (Maybank IB) also noted that the stock is trading at attractive valuations with about 4% yields.
The bank said Padini is “shielded on all fronts” being well positioned to benefit from both consumer downtrading trends or increases in consumer disposable income due to its mass-market appeal and low price point products.
“In the event that the US-China trade war escalates, we believe Padini may also stand to gain from better negotiating power with its suppliers in China,” said Maybank IB, which has a RM2.85 target price on the stock.
It said the positive impact from the appreciation of the ringgit is likely to materialise in the 4Q25 and beyond as the group is still in the process of running down its higher cost of inventory.
Padini typically keeps around four to six months of inventory.
“With over 50% of the group’s products sourced from China and just about 11% sourced locally, we are comforted that favourable foreign exchange movements could buffer any adverse earnings impact expected in a seasonally weak sales quarter in 4Q25,” said the research house.
