Affin Hwang Capital Research maintained a ‘sell’ proposal to Mr D.I.Y. Group (M) Berhad (Mr DIY) with the target price (TP) unchanged at RM1.21 and warned the company's earnings are at risk of declining in the next quarter.
Mr DIY recorded a major net profit of RM113.5 million in the third quarter of 2020 (3Q20), driven by high average monthly sales in each store.
Affin Hwang stated that the value of the income was also largely aided by gross margin growth of 2 percentage points to 42.4%.
"This increase may occur only once in our view because we expect an increase in price competition in the long run.
"We also project slower sales for each store and operating costs such as rent and wages will begin to outpace sales growth," the firm said.
The firm still maintains its revenue forecast against Mr DIY.
According to Affin Hwang, 60% of Mr DIY stores are located in shopping malls and that factor will have a high impact on the company's income, especially during the Movement Control Order (PKP) period.
