PAD reported a 3QFY25 core net profit of RM73.6m (+60.3% yoy, +23.1% qoq). bringing 9MFY25 total to RM155.2m (+19.7% yoy). The results exceeded expectations, due to better-than-expected sales during two festivities (Chinese New Year and Hari Raya).
The Group declared a fourth interim of 1.8 sen and a 1.0 sen special dividend this quarter (3QFY24: 4.0 sen), bringing the YTD DPS to 7.1 sen (9MFY24: 9.0 sen).
Despite potential macroeconomic headwinds, we believe PAD remains well-positioned to weather these challenges. The Group’s competitively priced products may even benefit from consumers downtrading as shoppers seek more affordable alternatives.
Following the earnings beat, we raised our earnings forecast for FY25/FY26/ FY27 by 41%/22%/18.5% respectively, to reflect better sales and stronger GP margins.
Re-iterate BUY recommendation with a higher target price of RM2.37 (from RM1.78), pegged to 12.3x PER on FY26F EPS of 19.2 sen, ascribed with three-star ESG rating.
Exceed expectations. Excluding forex loss (+RM0.4m) and provisions in write-offs for inventories (+RM1.3m), Padini (PAD) reported a 3QFY25 core net profit (CNP) of RM73.6m (+60.3% yoy, 23.1% qoq), bringing the 9MFY25 total to RM155.2m. The results exceeded expectations, accounting for 117% of our full-year forecast and 101% of consensus projections. This earnings outperformance was primarily due to better-than-expected sales during two festivities (Chinese New Year and Hari Raya).
Lower Dividend. The Group declared a fourth interim dividend of 1.8 sen and a 1.0 sen special dividend this quarter (3QFY24: 4.0 sen), bringing the YTD DPS to 7.1 sen (9MFY24: 9.0 sen).
YoY. 3QFY25 CNP soared 60.3% yoy to RM73.6m, primarily driven by heightened sales (+8.9% yoy) and significant margin expansion. Gross profit (GP) margin expanded by 6%-pts, attributed to the opening of four new Vincci stores in 2QFY25, which fetched better margins relative to other brands. Additionally, economies of scale and the launch of warehouse automation solution further bolstered cost efficiency. These improvements more than offset the cost escalation from minimum wage hike effective Feb 2025.
YTD. 9MFY25’s CNP increased by 19.7%, driven by a 5.6% yoy rise in revenue and a notable improvement in GP margin. The GP margin improved by 6%-pts yoy, attributed to the aforementioned strategic initiatives.
QoQ. CNP increased by 23.1% qoq, thanks to a 19.3% jump in revenue from increased sales in line with festivities and a 3%-pts improvement in GP margin. This margin uplift was likely due to an improved product mix and enhanced economies of scale.
Outlook. In late Mar 2025, PAD launched its first concept store in Malacca. This standalone shop lot at Tarcor Park houses three brands: Padini, Brands Outlet, and Vincci. As the store only commenced operations at the end of March, we anticipate its contributions will be reflected more substantially from the next quarter onwards. Additionally, the Group’s in-house logistics hub is expected to commence operations next quarter, which could further enhance cost efficiencies and expand margin.
Looking ahead, the next quarter is likely to be PAD’s seasonally weaker period due to the absence of major festivities. Despite potential economic slowdown from trade uncertainties and reduction in discretionary spending following the anticipated RON95 subsidy removal and higher electricity tariff, we believe PAD remains well-positioned to weather these challenges. The Group’s competitively priced products offer an appealing value proposition, which may even benefit from consumers downtrading as shoppers seek more affordable alternatives.
Earnings Revision. Following the earnings beat, we have raised our earnings forecast for FY25, FY26, and FY27 by 41%, 22%, and 18.5% respectively, to reflect the better sales and GP margins.
Valuation. We reiterate our BUY rating with a higher target price of RM2.37 (from RM1.78), based on a 12.3x PER applied to our FY26F EPS of 19.2 sen. The target price incorporates a 0% ESG premium/discount, consistent with the company's three-star ESG rating. We have raised our PE multiple from 11.2x to 12.3x, equivalent to its 3-year historical PE to better reflect the Group’s fundamentals.
Risk. Forex volatility may cause short term increases in material cost and freight charges.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.212042 | 4.248408 |
EUR | 4.921000 | 4.929487 |
CNY | 0.591903 | 0.592919 |
HKD | 0.540309 | 0.544492 |
SGD | 3.268153 | 3.293573 |