• Maintain BUY (TP: RM2.40). MRDIY’s 9MFY24 net profit of RM421.7mn (+4.9% YoY) was below both ours and consensus expectations, accounting for 64.5% and 65.8% respectively. An interim DPS of 1 sen was declared, bringing cumulative 9MFY24 DPS to 3.2 sen, reflecting a 77% payout (9MFY23: 2.2 sen). MRDIY’s 3QFY24 revenue surged by +6.4% YoY, but net profit declined by -1.9% YoY mainly impacted by the higher expenses attributed to increased admin expenses. Prospectively, we remain optimistic on MRDIY’s long-term growth, supported by its strategic and targeted store openings for both MRDIY and KKV, along with its effort to increase efficiency. Maintain a BUY call with a lower TP of RM2.40 from RM2.49 (based on PER of 33x pegged to FY25 EPS of 7.24 sen) after factoring in the higher operating expenses and KKV’s profit contribution.

• Key Highlight: In 3QFY24, revenue spiked by +6.4% YoY to RM1.1bn, mainly driven by higher transaction volume (+9.0% YoY) and positive contributions from the new stores (3QFY24: +49). However, net profit declined to RM121.6mn (- 1.9% YoY), attributed to higher administrative (+25.6% YoY) and other operating expenses (+10.2% YoY), reflecting increased staff costs in line with new stores openings and initial operation cost of the newly-commenced warehouse automation. On a QoQ basis, both revenue and net profit decreased by -5.1% and -21.6% respectively, primarily due to the absence of festive periods coupled with the higher operating expenses incurred.

• Earnings Revision: We have revised lower our FY24F/FY25F/FY26F earnings forecast by -6/-4%/-3%, reflecting higher operating expenses assumptions and factoring in KKV’s profit contribution.

• Outlook: MRDIY’s long-term outlook remains promising, supported by the strategic expansion of its store network and particularly now focusing on East Malaysia, where sales per store and population density are higher. KKV’s store expansion stands at 10 stores in FY24, with an additional 20 new stores targeted in FY25. In the near term, festivities season and the upcoming civil servant wage hike in 4QFY24 is anticipated to boost MRDIY’s sales. Nevertheless, we remain cautious on higher operating expenses due to the minimum wage hike and warehouse automation expenses. Overall, MRDIY targets to open 56 stores in 4QFY24 (total 1,383 stores as at 9MFY24), with a long-term goal of reaching 2,000 stores by 2028.

Source: BIMB Securities Research - 15 Nov 2024