• Overview. MR.D.I.Y.’s recorded the best ever quarter performance with top and bottom-line rising by 27% and 49% to RM975.4m and RM134.6m in 4Q21, owing to higher contribution from number of new stores (+23% yoy) and higher average monthly sales per stores (+4% yoy), as well as higher average basket size (+7% yoy). The total number of stores jumped to 900 during the period over total transactions of 33.1m (+20% yoy).
   
• Key Highlights: Nevertheless, in FY21, the GP margin dropped by 1.3 ppts cue to higher and other input costs amidst margin dilution from sales contribution of MR Dollar segment.

• Against estimates: Inline. Overall, FY21 net profit recorded above ours, but below consensus’ estimate at 110% and 71% respectively. We believe the higher-than-expected earnings’ estimate was due to return of the footfall and normalised retail operation hour during NRP implementation.

• Outlook. We remain upbeat on MR.D.I.Y’s business prospect as we see continuous strong demand for its home improvement products. Sector-wise, since adults and the total population vaccination rates have now reached 98% and 79%, we believe lockdown is no longer viable, thus we expect the consumer sector’s recovery to continue. This is aided by sustainable private consumption on the back of a resilient employment rate.

• Our call. Given the encouraging results, we are likely to raise our earnings forecast for FY22-FY24F pending some clarifications from the management. We maintain our target price of RM4.00 based on average FY22/23F EPS of 6.7sen and of 59.5x and HOLD recommendation for MRDIY.

Source: BIMB Securities Research - 17 Feb 2022