Review

• Padini Holdings Berhad’s (Padini) 1QFY25 core earnings came in below our and the consensus full-year estimates, at 12% and 13%, respectively. The deviation was mainly due to higher-than-expected depreciation and increased staff costs.

• The group declared a second interim dividend of 2.5 sen per share for 1QFY25, consistent with the DPS declared in 1QFY24.

• 1QFY25 revenue grew by 1.3% YoY to RM393.1mn, mainly driven by higher sales volume due to an increase in the number of outlets compared to the previous year.

• After adjusting for one-off items, adjusted PBT dropped by 25.8% YoY to RM26.6mn. The disappointing performance was attributed to rising staff costs and higher depreciation expenses of RM36.0mn (+20.9% YoY) this quarter, stemming from the expansion of outlets compared to the previous year

• With a decline in PBT, core earnings fell by 21.1% YoY to RM21.8mn, resulting in a lower core net profit margin of 5.5% in 1QFY25 (-1.4%-pts YoY)

Impact

• We maintain our FY25-27F earnings projections at this juncture, pending further insights from an analyst briefing tomorrow.

Outlook

• Management highlighted that the retail business remains challenging, driven by higher costs, rising inflation and interest rates, and ongoing concerns about trade tensions.

• Despite these challenges, Padini remains optimistic about its FY25 outlook, attributing its confidence to effective cost control measures and a focus on value-oriented products, which are expected to drive sales performance.

• Going forward, we anticipate that CNY sales will drive the group’s topline over the next 2 quarters, supported by increased foot traffic in shopping malls. Additionally, upcoming civil servant salary adjustments and higher minimum wages are expected to enhance retail spending, bolstered by greater disposable income among consumers.

Valuation

• We have placed our Buy recommendation under review, pending an analyst briefing tomorrow for further guidance on its FY25 outlook. Meanwhile, we maintain our target price at RM4.30/share, based on a 15x CY25 EPS.

Source: TA Research - 2 Dec 2024