DXN Holdings Bhd (DXN) is making notable strides with its expansion into Brazil and planned market entries into Argentina and Chile by end-CY24. According to CGS International Stock Broking House (CGS) and Maybank Investment Bank (Maybank), DXN's revenue outlook remains positive, supported by new product launches and geographical expansion. Despite a slight decline in gross margins due to rising raw material costs, DXN's strategic market moves and product diversification are expected to drive future growth.

CGS maintains its ADD call on DXN, with an unchanged target price (TP) of MYR0.85, reflecting an undemanding valuation at 7.5x CY25F Price-to-Earnings Ratio (P/E) and a dividend yield of 7%. CGS anticipates a 12% compound annual growth rate (CAGR) in revenue from FY24-27, driven by membership growth, new product offerings, and market expansions. The firm remains optimistic about DXN's earnings trajectory despite a higher country risk premium.

Maybank retains its BUY rating on DXN but has lowered its TP to MYR0.85, adjusting its earnings estimates downward by 5%-8% due to increased raw material costs. The bank notes that while price hikes are necessary, they may not fully offset the higher production costs. Maybank expects DXN's expansion into new markets and product innovation to partially mitigate the impact of rising costs, although margin pressures might persist into 3QFY25.

Both CGS and Maybank recognise DXN's strategic initiatives in expanding its market presence and diversifying its product range. The company's focus on entering new regions and launching new products aligns with its long-term growth strategy, positioning it as a promising investment despite near-term margin pressures.