The home improvement retailer was one of the most actively traded stocks on Bursa Malaysia, with 53.6 million shares changing hands.
The counter pared its gains by market close, up 12 sen or 8.4% to RM1.55, valuing the group at RM14.62 billion.
In a filing with Bursa yesterday, it announced Q2 net profit rose to RM150.32 million from RM135.19 million a year ago while revenue increased 4.9% to RM1.1 billion from RM1.05 billion previously, primarily due to positive contributions from new stores.
In a note today, Kenanga Investment Bank said the company’s first half net profit (H1 FY2023) aligned with projections, representing 47% of its yearly forecast and 49% of the consensus estimate for the fiscal year.
Its analyst Ahmad Ramzan raised his rating from “market perform” to “outperform”, noting the recent decline in its stock price had created an opportunity for investment.
The research house maintained its target price (TP) of RM1.67, factoring in a projected price-earnings ratio (PER) of 26 for FY2024.
However, Ahmad raised concerns about potential difficulties in the group’s sales performance attributed to the anticipated impact of inflationary pressures and gradual reopening of businesses.
“B40 consumers will have wider and cheaper alternatives for goods that Mr DIY is selling while those from the M40 group with a healthier balance sheet will have a better range of choices given the full reopening of the economy,” he said.
AmInvest analyst Tan Jia Hui continues to favour the company as it shifted its pricing approach from a fixed RM2 and RM5 to a flexible “one plus” model, allowing prices up to RM20.
“This has widened the range of value products available and led to improved sales trends, though still in a gestation period.
“Additionally, the company has added 2,000 new SKUs (stock keeping units) since April 2023 to enhance store appeal and attract more customers,” she added.
Unlike the other research houses, RHB Research has cut its initial TP of RM2.48 to RM2.29. However, it has maintained its “buy” rating as the group’s results trailed its full-year forecast but met the street’s projections.
“With consumer sentiment remaining soft, we expect Mr DIY to be more aggressive with promotional activities to stimulate consumer spending, leveraging cost savings from lower freight rates,” said its analyst Soong Wei Siang.
He opines the third quarter’s milder seasonal impact, resulting from the absence of festive periods, will become advantageous for the company in the future.