• Maintain BUY (TP: RM2.30). MRDIY’s FY23 net profit of RM560.7mn (+18.5% YoY) was in line with both ours and consensus expectations, accounting for 100.4% and 100.8% respectively. An interim DPS of 1.0sen was declared, bringing cumulative FY23 DPS to 3.2sen or a 54% payout (FY22: 2.4sen). Moving forward, we estimate a total FY24 DPS of 3.8 sen, translating into a DY of 2.5%. MRDIY’s 4QFY23, revenue and net profit each surged by +7.6% YoY and +16.6% YoY respectively, driven by encouraging and positive sales contributions of the new stores (FY23: +175) and consistent increase in total transaction volume (+16.7% YoY). The long-term outlook for MR.DIY remains positive, supported by its strategic plan to increase store openings and the commencement of warehouse automation in 3QFY24, which will increase utilisation factor. We maintain a BUY on MRDIY with an unchanged TP of RM2.30. Our valuation is based on a PER of 33x (below MRDIY’s -0.5SD 3-years average forward PE), pegged to FY24 EPS of 6.9 sen.

• Key Highlight: 4QFY23 revenue of RM1.1bn rose by +7.6% YoY, driven by positive contribution from new stores and a significant increase in total transaction volume (+16.7%). Net profit spiked to RM158.6mn (+16.6% YoY), assisted by both the higher revenue and improved GP margin attributed to the normalisation of freight costs to the levels of pre-pandemic and the positive impact from the price adjustment in FY22. Similarly, on QoQ basis, net profit surged by 28% mainly due to expansion of store network and the increase in sales during school holidays and the festive season.

• Earnings Revision: No change in forecast.

• Outlook: MRDIY outlook is driven by strategic store openings, stable margins, and improvements in utilisation factor. The group aims to open 2,000 stores by 2028, with a short-term target of adding 180 new stores in FY24 (1,225 stores as at FY23), focusing on East Malaysia due to its demographics, higher average sales per store of around 30%, and high population density per store. MRDIY’s initiative on increasing their efficiency by commencing the warehouse automation by 3QFY24 promises higher GP margin. Additionally, the 10% sales tax imposed on low value goods is seen as beneficial to MRDIY even though the basket size is comparatively small.

Source: BIMB Securities Research - 26 Feb 2024