Equity Analysis /
Thailand

Index Livingmall PCL: Recovery play; cheap valuation

  • Exciting YoY earnings growth for 1Q-2Q21

  • Earnings forecast upgrade reflects better SG&A cost control

  • New initiatives to augment sales and earnings

Phoowadol Phoosodngern
Bualuang Securities
16 April 2021

We suggest accumulating ILM, after a 10% MTD correction. It will deliver exciting YoY profit growth for 1Q-2Q21, driven by a lower SG&A/sales ratio. ILM trades at a 2021 PER of 12.5x, far below the home improvement peer mean of 29.5x. Our BUY call stands to a new YE21 target price of Bt17 (up from Bt16; profit forecast upgrade), a 10% discount to DCF-derived value (8.3% WACC).

Exciting YoY earnings growth for 1Q-2Q21

We estimate a 1Q21 core profit of Bt140m, up 19% YoY (flat QoQ). Our model assumes that sales slipped 5% YoY (flat QoQ), as SSS fell 9% (shallower than the 21.2% dive for 4Q20). Online sales (8% of 1Q21 sales) should have risen by 96% YoY and 3% QoQ. Sales GM is assumed at 44.8%, down by 120bps YoY and 70bps QoQ (promotions and a greater proportion of low-GM items in the sales mix). But the SG&A/revenue ratio should be marked down by 150bps YoY and 30bps QoQ, due to improved management of personnel and logistics costs. Thus, core margin should fatten by 130bps YoY and 10bps QoQ. For 2Q21, we expect exciting earnings growth of 700-800% YoY from the low base of Bt14m set by 2Q20 (but down QoQ on seasonality and due to effects of the COVID-19 outbreak).