MRDIY's 3Q24 results disappointed on weak sales volume and higher-than expected operating expensesf the latest earnings report, that said, the house expects 4Q24 earnings to improve, on festive spending and civil service wage increases. Outlook for FY25E remains positive in anticipation of an overall rise in consumer disposable income from various Government initiatives.
The FY24E-FY26E earnings estimates are reduced by 5%-9% however, Maybank has maintained its Buy call with a lower TP of MYR2.35 (-10sen) based on unchanged 30x FY25E PER, c.-0.5SD to mean. 9M24 net profit made up just 65% of FY24E MRDIY's 3Q24 net profit of MYR122m (-2% YoY, -22% QoQ) brought 9M24 net profit to MYR422m (+5% YoY). The latter reflected just 65%/66% of the house consensus FY24E. The earnings shortfall was largely due to underperformance in sales, along with higher-than-expected operating expenses.
A third interim DPS of 0.1sen brings YTD DPS to 3.2sen (DPR: 70%).3Q24 SSSG down -1.8% YoY 3Q24 revenue grew +6% YoY led by added contribution from new stores (+49 stores YoY), but partially offset by weaker SSSG of -1.8% YoY given softer average basket size of MYR24.90 (3Q23: MYR25.50). 3Q24 pre-tax profit declined by -2% YoY on higher administrative expenses (+26% YoY) from one-time charges of MYR3.7m in relation to its new automated warehouse, and higher interest expense (+15% YoY). On a QoQ basis, the absence of festive spending and softer consumer sentiment attributed to
its weaker topline (-5% QoQ) and bottom-line (-22% QoQ).
Expecting better earnings in 4Q24
MRDIY's total store count stands at 1,383 stores as at end-3Q24 (YTD: +128 stores, 71% of its FY24 target of +180 stores). The group targets to open +190 new stores in FY25. 4Q24 earnings are expected to come in stronger QoQ as consumer spending increases during the year-end festive season, coupled with potentially stronger sales momentum after the civil service salary hike on 1 Dec 2024. The FY24E/FY25E/FY26E earnings are lowered by -9%/-6%/-5% on adjusting for current operating run rates.
