PETALING JAYA: CGS International (CGSI) Research has cut its earnings forecasts for MR DIY Group (M) Bhd
on lower revenue projections, higher operating expenses and a cautious outlook over KKV.
KKV is the group’s lifestyle retail chain business.
The reduced forecasts came as MR DIY’s net profit for the first half of financial year 2026 (1H26) did not meet expectations.
“Higher electricity costs and continued losses from its associate KKV are likely drags on earnings in 2H26.
“As such, we cut financial year 2026 (FY26) to FY28 earnings per share by 5% to 8%,” CGSI Research said in a note.
It expects revenue to recover gradually in 2H26 as MR DIY may pass on the higher costs driven by Middle East tensions, following the expiry of its “Price Lock” campaign that ended on July 31.
“We expect FY26 gross profit margin of 47.5% (1H26: 48%), as a result of the price adjustments and residual impact of the stronger ringgit against US dollar on procurement costs.”
In the second quarter of financial year 2026 (2Q26), MR DIY’s core net profit came in at RM136.6mil, down by 14.1% year-on-year (y-o-y) and 28.9% quarter-on-quarter.
This brought 1H26 core net profit to RM328.6mil, below its and consensus’ expectations. The variance was mainly due to weaker-than-expected revenue, as MR DIY’s campaign did not generate a sufficient lift in sales volume growth, with same-store sales growth easing 3.6% y-o-y.
The weaker 2Q26 revenue growth was also a result of the earlier timing of Hari Raya celebrations this year.
“Management highlighted an increase in corporate social responsibility expenses, higher labour costs in the automation warehouse and introduction of sales and service tax on rentals starting July 2025, which resulted in margin compression.”
Despite the below-expectation results, CGSI Research said MR DIY’s special dividend payout was a positive surprise.
MR DIY declared a total distribution per share of 3.3 sen for the quarter, comprising a 1.3 sen interim dividend and a two sen special dividend.
This translated to a 142% dividend payout ratio for 1H26, above CGSI Research’s FY26 estimate of 112%.
“We also raise our dividend payout assumptions to 140% for FY26, followed by 120% in FY27 and 115% in FY28 as we expect MR DIY to continue to return excess capital to shareholders in its pursuit to raise return on equity.”
CGSI Research retained an “add” call on the stock, given its attractive valuations, further supported by 6% dividend yields through FY26 to FY28.
