Despite MR DIY Group Bhd reported a disappointing third quarter of 2024 (3Q24) results, with net profit dropping 22% quarter-on-quarter to RM122 million due to weak consumer sentiment and higher-than-expected operating expenses, both Maybank Investment Bank Bhd (Maybank IB) and RHB Investment Bank Bhd (RHB Research) have maintained their BUY ratings on the stock.
However, Maybank IB has lowered its target price (TP) to RM2.35 from RM2.45, while RHB Research also has set a similar TP as Maybank IB, reflecting a 12% and 13% upside potential, respectively.
For the first nine months of 2024, MR DIY's net profit reached RM422 million, a 5% increase from the same period last year, but it made up only 65% of FY24E estimates. Both analysts revised their earnings estimates downwards by 5%-9% for FY24E to FY26E due to the weaker-than-expected performance.
Despite the disappointing quarterly results, both analysts believe the company is well-positioned for future growth. MR DIY's store count reached 1,383 by the end of 3Q24, and the company is on track to meet its target of 180 new stores for FY24. MR DIY plans to open 190 new stores in FY25, including outlets under its KKV brand and a new beauty and cosmetics brand, The Colorist.
Maybank IB expects earnings to improve in 4Q24, driven by festive season spending and the civil service wage increase set for December 2024. RHB Research remains optimistic about MR DIY's long-term prospects, driven by store expansion and growth in disposable income.
The research houses are also optimistic about the company's ability to benefit from government initiatives aimed at increasing disposable income, such as the civil service salary hike and cash handouts for lower-income groups in 2025.
While 3Q24 operating expenses were higher due to one-time charges from the new automated warehouse, both Maybank IB and RHB Research see significant upside potential for MR DIY as consumer sentiment improves. With an expected boost from the stronger Malaysian Ringgit and continued expansion, MR DIY remains a solid pick for long-term investors.
