Investment Highlights

• We maintain BUY on MR D.I.Y Group (M) (DIY) with an unchanged DCF-based fair value of RM2.60/share. This implies FY24F PE of 34x, which is 1 std dev above of its 2-year average of 30x. We continue to ascribe a neutral ESG rating of 3 stars to DIY.

• We maintain FY24-FY25F earnings as FY23 core net profit of RM561mil came within expectations, 2% below our forecast and consensus estimate. We introduce FY26F net profit with a 7% growth premised on revenue expansion of 9%.

• The group declared an interim dividend of 0.1 sen per share, which brought FY23 total dividend to 3.2 sen per share (+31% YoY).

• YoY, FY23 revenue grew 9%, mainly attributed to opening of 175 new stores despite weaker consumer sentiments. Together with gross margin rising by 4%-point to 45.4% following the reduction of freight costs and product price adjustment in FY22, DIY’s net profit improved 19%.

• QoQ, 4QFY23 revenue rose by 8% due to new store launches and higher footfalls on festive season and school holidays. Coupled with better operating efficiency and product mix, 4QFY23 earnings grew by 28% QoQ to RM159mil.

• With 1,255 stores as at end-4QFY23, the company targets to launch 180 new stores in FY24F and up to 2k stores by 2028. The new store openings will be a mixture of its 3 core brands which will be skewed towards more MR DIY flagship concept stores.

• The company just constructed an automated warehouse which will be fully equipped by April 2024. The company expects that the warehouse will start commencing in 3QFY24. We understand that with this automated warehouse helps to reduce labour dependency, which is expected to generate a net annual saving of RM10mil from wages and warehouse rental savings.

• We continue to favour DIY as its robust revenue growth will be driven by:
  
  (i) ambitious store network expansion plans, and
  
  (ii) better product mix by introducing new SKUs to cater for the needs of the affordable market segment.

• At an attractive FY24F PE of 21x, the stock is trading below its historical 2-year average of 30x.

Source: AmInvest Research - 26 Feb 2024