Home Product Center Plc
- Despite the coup and restricted shop hours due to the curfew, we expect HMPRO to
report good sales growth from both store expansion and solid SSS growth.
high SG&A from new format launches will continue to put
margins. We maintain Outperform on the stock.
- We expect 2Q14 total revenue of Bt12.8bn, up 23.2% YoY,
15 stores opened over the past 12 months (up from 56 stores at end
solid 4.0% YoY SSS growth. As the majority of their sales are contributed by existing
homeowners (80% of sales) and the rest by new home
to deliver resilient SSS growth over 2014.
- Store opening plan on track. During 2Q14, HMPRO opened four stores in
provincial Thailand, three of which are traditional HomePro formats in Lampang,
Prachuap Khiri Khan and Surin Provinces and a MegaHome store in Chonburi
Province. Year-to-date, HMPRO has opened five stores (3 HomePro and 2
MegaHome), and the company is on track with its full
stores (8 HomePro, 2 MegaHome and 1 Malaysia HomePro).
- We expect stable margin, supported by growing private label sales.
expect gross profit margin to slightly decline by 20bps YoY to 31.1% as margin
improvement from the rising private label sales contribution is offset by rising
depreciation expenses from aggressive store openings.
- High SG&A driven by preopening and startup.
operation for its MegaHome format (4 stores currently) and high startup cost for its
upcoming Malaysia HomePro store, we expect the SG&A t
at 22.2%, on par with that in 1Q14.
- We expect 2Q14 net profit of Bt825m, up 12.9
to rising SG&A from aggressive expansion and interest expenses for capex funding,
we expect net profit to grow slower than revenue.
Earnings and target price revision
- We lower 2014-16E net profit by 3% to adjust for higher
new format expansion.
- 12-month price target: Bt12.50 based on a DCF methodology.
- Catalyst: Strong SSS growth, successful new format expansion, rising private label
Action and recommendation
- We remain positive on the long-term outlook for HMPRO given its strategy to
penetrate new markets despite near-term pressure from mounting SG&A for the new
format expansion. We keep our Outperform rating on the stock with an unchanged
TP of Bt12.5.