• 1Q21 core net profit of RM124.6m (+113.5% yoy) came in above our and consensus estimates - due to higher per-store sales.
• 1Q21 saw a net 54 new store openings qoq, aiding revenue and core net profit growth which expanded 13.3% qoq and 6.5% qoq respectively
• We raise our 2021-23E earnings by 3.6-11.5% largely to input higher per-store sales. Post rolling forward our base year to 2022E, we arrive at a higher TP of RM4.10 based on an unchanged PER of 43x

1Q21 Core Net Profit at RM124.6m (+113.5% Yoy)

Mr DIY posted commendable 1Q21 results. Although revenue jumped by +62.9% yoy to RM870.2m, this was mainly attributable to higher average per-store revenue in part amidst a lower base in 1Q20 from the more stringent lockdown measures imposed in March 2020, when stores were temporarily closed. In addition, higher revenue was also a result of positive contribution from new stores, where the total number of stores across its three brands increased to 788 in 1Q21 (+25.5% from 628 in 1Q20). Overall EBITDA margin was higher by +1.3ppt yoy to 27.2%, resulting from overall lower admin and other expenses, although this was slightly negated by a softer GP margin, which declined to 42.1% (-1.3ppt yoy) mainly due to an increase in freight costs. All in, core net profit for the quarter came in at RM124.6m (+113.5% yoy), which we deem above our and the street’s expectation on higher-than-expected per-store sales.

54 Net New Stores Opened in 1Q21

Sequentially, revenue and core net profit registered a 13.3% and 6.5% growth respectively due to an increase in transactions and contributions from a net increase of 54 stores during the quarter, comprising of 30 new MR D.I.Y. stores, 22 new MR DOLLAR and 2 new MR TOY stores. Elsewhere, the group declared a DPS of 0.8sen for the quarter, above our forecasts.

Maintain HOLD

We raise our 2021-23E earnings estimates by 3.6-11.5% largely taking into account a higher average revenue per store of RM11,942/day for 2021 (from RM11,106/day previously). We roll forward our base year to 2022E, resulting in a higher TP of RM4.10 based on an unchanged target PE of 43x. While we are encouraged by the continued robust store expansion plans, valuations at this juncture looks rather fair at 42x 2022E PER, in our view. Maintain HOLD. Up/downside risks: (i) earlier/later-than-expected herd immunisation, (ii) spike/fall in consumer sentiment, and (iii) faster/slower-than-expected store openings.

Source: Affin Hwang Research - 3 May 2021