Equity Analysis /

Home Product Center PCL: Buying into the quality name

  • Set for SSSG and faster earnings growth in 2H22

  • House brands to support margin and customers trading down

  • Strong low-rise sales should sustain home improvement demand

Bualuang Securities
9 June 2022

Although HMPRO’s 2Q22 operation may be soft, we still like the stock as the leading home improvement play and a beneficiary of reopening and ongoing demand. The stock’s current PER is close to its Feb 2020 low, when COVID-19 became an issue, so downside risk appears limited. We expect more exciting 2H22 earnings to trigger a stock price rise. BUY!

Set for SSSG and faster earnings growth in 2H22

Our channel check with HMPRO suggests a 2Q22-to-date SSS decline of 1%. But while HomePro Thailand has seen 1% SSS slippage, HomePro Malaysia’s QTD SSSG is close to 30%, boosted by govt support (allowing the withdrawal of up to 10k ringgit from provident funds). Looking to MEGA HOME, the long Songkran holiday in April dampened construction activity, so the chain’s SSS has also declined QTD. As a result, we expect HMPRO’s 2Q22 profit to be unexciting (up modestly YoY, possibly down QoQ). But the outlook for 2H22 is for strong YoY and HoH earnings growth, driven by sales in tourism cities in Thailand (especially the southern and eastern regions, which comprise about 30% of sales), as hospitality biz owners refurbish their properties.