TA Research is keeping its revenue forecast of RM2.1bil for FY25.
PETALING JAYA: Analysts continue to hold Padini Holdings Bhd
in good light, despite the group having posted a weaker quarter profit-wise for its first financial quarter ended September (1Q25) compared to the same period a year ago.
Padini saw net profit fall to RM11.5mil against the RM26.7mil recorded for 1Q24, even though revenue actually increased 1.3% year-on-year (y-o-y) to RM393.1mil, with the group attributing the decline in earnings to higher total expenses of RM130mil in 1Q25, compared to RM110mil in the previous year.
The rise in overall expenses was primarily driven by higher staff costs, which amounted to approximately RM39mil and increased depreciation expenses of RM36mil.
The higher depreciation was largely due to significant renovations carried out last year, which impacted 1Q25.
TA Research noted that Padini’s 1Q25 revenue accounted for 19% of the research house’s full-year forecast.
“Nonetheless, the group’s management observed no signs of weakening consumer spending.
“Therefore, we remain optimistic about the full-year outlook, underpinned by higher disposable income, which is expected to boost discretionary spending, strong tourist arrivals driving sales at tourist-driven outlets and improvements in the product range aimed at attracting new customers,” it said.
The securities firm is keeping its revenue forecast of RM2.1bil for FY25, which represents an increase of 8.6% y-o-y, coupled with the belief that Padini will continue to manage costs efficiently and improve operational effectiveness.
“As of 1Q25, the net cash position stood at RM765.9mil, which is a 22.5% growth y-o-y.
“Looking ahead, we are confident that Padini will continue to reward its shareholders with a consistent dividend payout of 11.5 sen per share in FY25, in line with FY24,” it added.
According to TA Research, this projection is supported by a projected strong net cash position of RM881.1mil in FY25.
Meanwhile, CIMB Securities Research reported that Padini expects to record higher quarterly sales in 2Q25, mainly owing to festive demand, with Christmas festivities falling in the quarter and with the earlier timing of Chinese New Year festivities in 2025.
The brokerage firm said the group is also confident that supportive government initiatives such as the minimum wage hike will spur more consumer spending that will translate into higher demand for its products.
“With its 1Q25 gross profit (GP) margin at 35.6%, Padini shared that it expects its GP margins to remain in the 35% to 38% range; a healthy range for the company.
“This aligns with the aim of keeping its products affordable for the mass market, as Padini does not believe a high GP margin is sustainable for its business model and target market,” noted CIMB Securities.
It added that the group expects any margin gains from the impact of a stronger ringgit, as well as cost efficiencies, to lead to a more gradual increase in margins in the following quarters.
Furthermore, the research house said Padini highlighted that it will continue to add more new stores in the current financial year and the number of new store additions will be dependent on the availability of suitable locations, but the total will likely be less than 10.
Both TA Research and CIMB Securities are maintaining their “buy” calls on the counter, with respective target prices of RM4.30 and RM3.80.
