KUALA LUMPUR: Analysts remain optimistic about MR DIY Group (M) Bhd’s store expansion strategy to defend its market share as the leading home improvement retailer.
In a filing with Bursa Malaysia yesterday, the group announced that its net profit in the first quarter ended March 31, 2023 (1Q 2023) rose to RM127.77 million from RM100.50 million in 1Q 2022, mainly due to higher revenue and gross profit.
Revenue also increased by 15.6 per cent to RM1.04 billion from RM905.16 million previously, primarily driven by the 18.8 per cent year-on-year (y-o-y) increase in its number of stores, from 947 stores previously to 1,125 stores.
In a note, Hong Leong Investment Bank Bhd (HLIB) expects the group’s results to chart recovery in the subsequent quarters, reflecting the impact of lower freight costs, coupled with the full effect of price increases.
“We remain optimistic with the group strategy of store expansion to defend its market share as the leading home improvement retailer,” it said.
As such, HLIB has maintained its ‘buy’ call on MR DIY’s shares, albeit reducing the target price (TP) to RM2.12 from RM2.15 previously.
Meanwhile, RHB Investment Bank Bhd (RHB IB) believes that the group’s positive earnings momentum is sustainable, taking into account the cost tailwinds with the favourable freight rates movement.
This should protect the group’s improved gross profit margin, and at the same time, provide MR DIY room to be more aggressive with promotions, it said.
“This will be effective in driving foot traffic and stimulating consumer spending against the backdrop of elevated inflation,” it added.
Meanwhile, RHB IB noted that MR DIY’s plan to open 180 stores in financial year 2023 is on track with the addition of 45 new stores in 1Q 2023.
The group is also introducing a new variant of its Mr Dollar brand in the form of Mr Dollar One Plus, in order to be more flexible with its product offerings.
Taking everything into account, RHB IB has maintained its ‘buy’ call on MR DIY, with TP of RM2.48.
At 11 am, MR DIY’s shares rose one sen to RM1.60 per unit with 14.14 million shares transacted. – BERNAMA
