MRDIY: Formed a hammer candlestick

Riding on steady store expansion. Bucking the cautious outlook surrounding consumer sentiment, MRDIY concluded FY23 on a high note with record-breaking revenue and profit. The commendable performance was primarily fuelled by the positive impact of new store openings and increased transaction volume, coupled with improved margins through price adjustments and the normalization of freight costs.

Looking ahead, we reckon MRDIY’s growth will continue to be anchored by the steady store expansion. For FY24, the group is targeting 180 new store openings, predominantly focusing on East Malaysia due to (i) 58% higher population density per store and (ii) 30% higher average sales per store in the region. It is noteworthy that since its IPO in 2020, MRDIY has expanded its store network by 111.6%, from 593 in FY20 to 1,255 by end of FY23, as well as a 66.3% earnings surge over the same period. Moreover, the group's emphasis on optimizing revenue per square foot and operational efficiency is expected to further bolster its financial performance.

Proxy to down-trading play. The forthcoming rationalization of subsidies, particularly focusing on petroleum products (which constituted 82% of 2022's subsidies), is likely to dampen consumers' spending power, consequently negatively affecting consumer counters. Nevertheless, the negative impact could be partially cushioned by the cash aid dished out to selected groups (i.e. targeted subsidies) as identified by PADU. As the T20 will likely be excluded from the targeted subsidies – and hence denting their discretionary income – this could give rise to potential “down-trading” beneficiaries such as MRDIY given its low ticket items.

Set for rebound? The formation of a hammer candlestick on the last trading day, accompanied by on the mend indicators, indicates that MR.DIY is poised for a rebound. A successful breakout above RM1.52 hurdle will spur the price toward RM1.59-1.65-1.72 region. Cut loss at RM1.37.

Collection range: RM1.43-1.46-1.50

Upside targets: RM1.59-1.65-1.72

Cut loss: RM1.37