• Maintain BUY (TP: RM2.30). MRDIY’s 1QFY24 net profit of RM144.9mn (+13.4% YoY) was in line with both ours and consensus expectations, accounting for 22.1% and 22.6% respectively. A higher interim DPS of 1.0sen was declared (vs 1QFY23: 0.6 sen), bringing to a payout of 65%. We maintain our FY24F DPS forecast at 3.8 sen which implies dividend yield of 2.1%. MRDIY’s 1QFY24 revenue and net profit surged by +9.2% YoY and +13.4% YoY respectively, driven mainly by positive sales contribution from the new stores, with the additional 37 stores during this quarter along with consistent increase in total transaction volume (+15.8% YoY) to 44.2mn. To date, it has a total of 1,298 stores and it targets to expand this to 2,000 stores by 2028. Overall, we are optimistic with its strategic stores expansion in East Malaysia, underpinned by its value for money goods and large brand recognition. We maintain a BUY on MRDIY with an unchanged TP of RM2.30. Our valuation is based on a PER of 33x (0.5SD below 3-years average forward PE), pegged to FY24 EPS of 6.9 sen.

• Key Highlight: 1QFY24 revenue rose by +9.2% YoY to RM1.1bn, mainly driven by the positive contribution from new stores, which increased by +15.4% YoY to a total of 1,298 stores. Net profit spiked to RM144.9mn (+13.4% YoY) inline with higher revenue and supported by improved GP margin (+1.5 ppts YoY to 45.8%) attributed to the normalization of supply chain and lower freight cost. However, on QoQ basis, revenue declined by 0.3% due to seasonal sales effects while net profit declined by 8.7% QoQ due to higher operating expenses especially labour cost.

• Earnings Revision: No change in forecast.

• Outlook: MRDIY positive outlook is supported by consistent strategic store openings and stable margins. The group plans to open 180 new stores in 2024 and to expand it further to 2,000 stores by 2028. This will be achieved by strategic expansion in East Malaysia (EM) where it currently has lower penetration rate comparatively to West Malaysia region. Note that it has successful opened 4 new stores in 1QFY24, bringing the total number to 150 stores in EM to date.

Source: BIMB Securities Research - 10 May 2024