Maintain BUY (TP: RM2.30). MRDIY’s FY23 net profit of RM560.7mn (+18.5% YoY) was in line with both ours and consensus expectations, accounting for 100.4% and 100.8% respectively. An interim DPS of 1.0sen was declared, bringing cumulative FY23 DPS to 3.2sen or a 54% payout (FY22: 2.4sen). Moving forward, we estimate a total FY24 DPS of 3.8 sen, translating into a DY of 2.5%. MRDIY’s 4QFY23, revenue and net profit each surged by +7.6% YoY and +16.6% YoY respectively, driven by encouraging and positive sales contributions of the new stores (FY23: +175) and consistent increase in total transaction volume (+16.7% YoY). The long-term outlook for MR.DIY remains positive, supported by its strategic plan to increase store openings and the commencement of warehouse automation in 3QFY24, which will increase utilisation factor. We maintain a BUY on MRDIY with an unchanged TP of RM2.30. Our valuation is based on a PER of 33x (below MRDIY’s -0.5SD 3-years average forward PE), pegged to FY24 EPS of 6.9 sen.
Key Highlight: 4QFY23 revenue of RM1.1bn rose by +7.6% YoY, driven by positive contribution from new stores and a significant increase in total transaction volume (+16.7%). Net profit spiked to RM158.6mn (+16.6% YoY), assisted by both the higher revenue and improved GP margin attributed to the normalisation of freight costs to the levels of pre-pandemic and the positive impact from the price adjustment in FY22. Similarly, on QoQ basis, net profit surged by 28% mainly due to expansion of store network and the increase in sales during school holidays and the festive season.
Earnings Revision: No change in forecast.
Outlook: MRDIY outlook is driven by strategic store openings, stable margins, and improvements in utilisation factor. The group aims to open 2,000 stores by 2028, with a short-term target of adding 180 new stores in FY24 (1,225 stores as at FY23), focusing on East Malaysia due to its demographics, higher average sales per store of around 30%, and high population density per store. MRDIY’s initiative on increasing their efficiency by commencing the warehouse automation by 3QFY24 promises higher GP margin. Additionally, the 10% sales tax imposed on low value goods is seen as beneficial to MRDIY even though the basket size is comparatively small.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....