MRDIY: Retailer Exceeds Earnings Expectations, Target Price Points to Significant Upside
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A leading home improvement retailer has reported a robust financial performance for the first nine months of 2025 (9M25), aligning with market expectations. The positive results were primarily driven by a notable expansion in gross profit margins and strategic growth of its store network across the region.
Performance Highlights
The company recorded a 9M25 core net profit of MYR472 million, marking a significant 12% year-on-year increase. This figure represents 74% of both the investment bank’s and consensus full-year estimates, underscoring the strength of its operations. Revenue for the period climbed 6% to MYR3.7 billion, predominantly supported by the addition of 139 new stores, bringing its total outlet count to 1,528. Gross profit margin showed a strong improvement, expanding by 2 percentage points to 47.6%. This margin enhancement was attributed to favorable foreign exchange rates and the increasing scale of operations, effectively offsetting the rise in operating expenses stemming from higher minimum wages and utility costs.
Quarterly Performance and Challenges
Despite the strong cumulative performance, the third quarter of 2025 (3Q25) experienced a slight sequential dip. Revenue for 3Q25 was 1% lower quarter-on-quarter at MYR1.2 billion, with core net profit for the quarter declining 12% quarter-on-quarter to MYR139 million. This moderation was primarily due to cautious consumer sentiment and spending, coupled with negative operating leverage. The company maintained its commitment to shareholder returns, distributing a 3Q25 dividend per share (DPS) of 1.3 sen, representing a payout ratio of 90%.
Future Outlook and Strategy
The outlook for the retailer remains positive. A strengthening Malaysian Ringgit is expected to be a boon, as approximately 70% of the company’s product mix comprises imported goods. The growing scale of operations, with plans for over 5,000 stores globally and the addition of around 1,000 new stores annually, is anticipated to enhance its bargaining power through collective procurement practices. This advantage may enable the company to launch more aggressive price promotions and marketing campaigns to stimulate consumer spending. Furthermore, consumer-friendly fiscal policies, including cash handouts and inclusive petrol subsidy rationalization, are expected to bolster consumer sentiment and translate into higher sales volumes.
In a strategic move, the FY26 store opening target has been revised down to 155 from 190. This adjustment is aimed at allowing the company to optimize its product offering and drive footfall more effectively. Key risks identified in the report include potential major delays in expansion plans and persistently weak consumer sentiment.
Analyst View
TA SECURITIES has reiterated its “BUY” recommendation for the retailer. The investment bank has set a target price (TP) of RM0.25, which represents a substantial 25.0% upside from the last traded price of RM0.20.
