KUALA LUMPUR (May 3): Some analysts have revised up their target prices (TPs) and earnings forecasts for MR DIY Group (M) Bhd after its profit for the first quarter ended March 31, 2021 (1QFY21) beat their expectations.

UOB Kay Hian analyst Philip Wong said in a note today MR DIY’s 1QFY21 earnings beat the research house's expectations on the back of its resounding in-store sales and accelerated store expansion.

“We raise our 2021-23 revenue per store growth assumption to 15%/0%/2% from 10%/2%/2% previously and our net store addition assumption to 200/190/170 from 175 a year previously.

“Our 2021 to 2023 earnings are raised by 4%/8%/8% respectively. Key downside risks are a sharp weakening of the ringgit against the renminbi and trade restrictions by China,” he added.

He maintained buy call on the stock and revised up his target price (TP) to RM4.85, from RM4.

Wong notes that he continues to like MR DIY for its attractive 3-year net profit compounded annual growth rate (CAGR) of 30.2% in 2020 to 2023, its established track record and it being the largest home improvement retailer in Malaysia, home improvement spending in Malaysia being among the highest in the ASEAN region, and its highly cash-generative nature.

Meanwhile, RHB Research Institute’s analyst Soong Wei Siang said, MR DIY 1Q21 results exceeded expectations for the second consecutive quarter on stronger-than-expected sales growth.

“We foresee the proven business model and outlet expansion plan to sustain robust earnings growth momentum moving forward, notwithstanding the challenge posed by the ongoing pandemic,

“Buying interests should continue to be spurred by the market’s pursuit of quality and liquid large-cap consumer stocks as well as the stock’s imminent inclusion into the FBM KLCI,” he said.

Post results, he raised MR DIY FY21 to FY23 earnings by 4% after imputing more aggressive sales growth assumptions.

He also forecasts the company to chart an exciting 3-year earnings CAGR of 28% moving forward.

He maintained buy call on MR DIY and revised up its TP to RM4.71 from RM3.95.

“Risks to our recommendation include major supply chain disruptions and a sharp rise in input costs,” he added.

Hong Leong Investment Bank Research’s analyst Syifaa’ Mahsuri Ismail, on the other hand said, MR DIY’s 1QFY21 core profit after tax of RM125 million matched her expectations.

“Post annual report adjustments, our FY21/22 forecasts increase marginally by 1.9%/0.6%,” she added.

She maintained buy call on MR DIY with higher TP of RM4.79 (from RM3.81) based on higher price to earnings multiple of 50 times (from 40 times) pegged to FY22 earnings per share.

“With the encouraging start, we reckon MR DIY will be able to surpass their target of 175 new stores in 2021 across three existing brands.

“Furthermore, based on the last closing price of 30 Apr 2021, the implied market capitalisation ranks MR DIY as the 20th largest market cap company. We opine the premium is justified to account for the possible inclusion into the FBM KLCI index,” she said.

Meanwhile, AmInvestment Bank Research is maintaining its earnings forecasts and target price for MR DIY. It kept its buy call on MR DIY with an unchanged TP of RM4.48.

It noted that MR DIY’s 1QFY21 net profit of RM125 million came within its and consensus expectations, making up 24% and 25% of the full year’s forecast respectively.

“While MR DIY’s faster-than-expected store openings are likely to provide positive earnings contribution, we are wary of the lacklustre performances of MR DOLLAR and MR TOY, as well as a possible retightening of pandemic restrictions in light of the recent spike in cases,” it said.

At the time of writing today, MR DIY fell 10 sen or 2.51% to RM3.89, valuing the group at RM25.04 billion.

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MR DIY posts record quarterly net profit amid surge in sales