PETALING JAYA: MR DIY Group (M) Bhd
’s focused growth plans are set to drive the group’s earnings performance going forward.
CGS-CIMB Research, in a report, said it is turning more positive on MR DIY’s revenue growth trajectory, following its recent meeting with the company to discuss its five-year store expansion plan from 2024 to 2028.
“We raise our financial year 2024 (FY24) and FY25 year-on-year sales growth assumptions to 10.6% and 10.5% respectively from 6.3% and 5.2% previously.
“This is premised on management’s renewed focus on expanding its store network, particularly its flagship MR DIY concept store, into underserved areas of Sabah and Sarawak.”
The research house pointed out that this should drive sales growth.
“MR DIY noted that its Sabah and Sarawak stores typically experienced more than 30% higher average sales per store compared with Peninsular Malaysia.
“Note that the stores accounted for just 12% (versus 87% in Peninsular Malaysia) or 144 of total store count as of September 2023, indicating room for more stores,” it said
According to CGS-CIMB Research, MR DIY is targeting 180 new store openings in FY24.
“It has a store count target of 2,000 by 2028 as Malaysia’s home improvement retail sector remains underpenetrated.”
The research house said the company’s home improvement retail sector formed 3.1% of total retail sales in 2022.
Additionally, the research house said it is encouraged by MR DIY’s private label strategy (MR DIY branded goods) as it continues to build its own product brand image.
“We gather from management that private label product sales have grown considerably from just 17% in FY19 to 50% of total sales currently.
“In our view, this is a testament to its growing brand equity.
“This should bode well for its gross profit margin trajectory which widened by 480 basis points year-on-year to 45.2% in the first nine months of 2023.”
CGS-CIMB Research said MR DIY’s private label strategy allowed it to expand its private label offerings and stock-keeping units into new product categories.
“Its basket size increased from the pre-pandemic level of RM22.2 in FY19 to RM25.5 in the third quarter of 2023.
“A further scale up in its store operation and offerings should drive margin expansion and basket size,” it said.
CGS-CIMB Research is upgrading MR DIY from “hold” to “add” as it turns positive on the company’s growth trajectory, driven by the group’s store expansion and private label strategies.
The research house has a higher target price of RM1.90, compared with RM1.50 previously.
For the third quarter ended Sept 30, 2023 (3Q23), MR DIY saw its revenue grow by 10.4% year-on-year to RM1.1bil, driven by contributions from new stores.
Net profit rose by 22.5% year-on-year to RM123.9mil, while net earnings margin improved by 1.1 percentage points to 11.6%, mainly due to the normalisation of freight costs as well as the impact of price adjustment exercise carried out in FY22.
Basic earnings per share stood at 1.31 sen versus 1.07 sen previously.
