KUALA LUMPUR: Affin Hwang Capital expects robust sales growth of 7.0 per cent year-on-year (yoy) for DKSH (M) Holdings Bhd in its financial year 2022 (FY22), due to resilient demand for imported products as business returns to normalcy.

However, the research house said going into FY23 earnings, sales growth was expected to decline by 4.1 per cent yoy.

"This is due to the heightened risk of a recession in 2023 and thus a reduction in consumption growth. 

"From there on, we believe sales may normalises and grow by 3.0 per cent yoy in FY24 earnings," it said. 

Affin Hwang expects DKSH's earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin to range between 3.0 per cent and 3.4 per cent in FY22-FY24. 

The firm said FY22 Ebitda margin wad expected to expand slightly by 0.2 percentage poiht (ppt) yoy to 3.4 per cent due to active management efforts in managing its working capital as well as costs controls in its operations with better product mix. 

"However, going into FY23, Ebitda margin is projected to compress by 0.3 ppt yoy to 3.1 per cent as rising input costs in 2022 are expected to be reflected in FY23E as inventories with low prices are expected to run out.

"On the prudent side, we expect a similar level of Ebitda margin in FY24 (0.1 ppt yoy) of 3.0 per cent pending further market developments," it said. 

Affin Hwang reiterated a "Hold" call on DKSH with an unchanged target price of RM4.38.

"We project core net profit to decline between 0.5-16.1 per cent yoy for FY22-FY23 on the back of heightened risk of a recession in an inflationary cost environment before recovering mildly by 3.0 per cent yoy in FY24," it added.