Review

• Padini Holdings Berhad’s (PADINI) FY23 core net profit of RM229.1mn (+49.4% YoY) came in within ours but above the consensus’ earnings forecasts, accounting for 105% and 106% of the projections, respectively.

• The group declared its first interim dividend of 2.5sen/share for FY24 (1QFY23: 2.5sen/share).

• YoY, the group’s FY23 revenue jumped 38.1% YoY to RM1822.1mn, mainly driven by full operating capacity in the financial year under review compared to FY22, which closed for 79 days as a result of FMCO. In line with the topline growth, the group’s EBIT soared by 40.9% YoY to RM300.8mn.

• QoQ, 4QFY23 revenue rose marginally by 4.2% to RM476.3mn, thanks to higher sales volume during the Hari Raya festive season and mid-term school holiday. As a result, the group’s EBIT also grew substantially by 38.9% to RM80.7mn, driven by higher sales and partly attributed to additional bonus payout in the preceding quarter.

Impact

• We make no changes to our earnings forecasts pending for an analyst briefing today. Meanwhile, we introduce our projections for FY26.

Outlook

• Going forward, the retail sector is expected to be challenging due to rising costs of living and unfavorable economic conditions. Despite the normalizing supply chain issues, material costs, and freight expenses, we remain wary on potential short-term cost increases due to trade tensions. Nevertheless, we anticipate resilient sales ahead in FY24 driven by competitive pricing, strong brand loyalty, and an expected influx of inbound tourists boosting sales in tourist-centric locations.

Valuation

• Reiterate Buy with unchanged target price of RM5.10/share based on 15x CY24 EPS.

Source: TA Research - 28 Aug 2023