• Overview. PetDag 1Q21 turned to core profit RM191m (1Q20: core loss RM23m) underpinned by inventory gains from rising MOPS price and better cost management which more than offset the impact of lower sales volume. Gross profits rose 55% yoy to RM716m (1Q20: RM476m) while opex declined 14% to RM522m (1Q20: RM605m).
   
• Key highlights. Sales volume declined by 21% yoy and 3% qoq to 2.87bn litres (1Q20: 3.6bn litres; 4Q20: 2.97bn litres) due to re implementation of MCO in early Jan 21 which restricts interstate travels.
   
• Against estimates: Inline. 1QFY21 core profit was inline with our and consensus estimate at 26% and 30% respectively.
   
• Dividend. A 1st interim DPS of 14 sen was declared which is higher than 1Q20 DPS of 5 sen. This implies payout ratio of 73%.
   
• Outlook. The resurgence in Covid-19 cases has dampened further recovery in demand. However, we think greater recovery is possible by 4Q21 based on government’s target to achieve vaccination rate of 80% by end of year.
   
• Our call. Maintain HOLD recommendation on PetDag with unchanged DCF-derived TP of RM18.20. This implies 25x FY21F P/E (Table 4). We recommend investors to accumulate the stock at lower level.

Source: BIMB Securities Research - 27 May 2021