Home Product Center

Home Product Center Plc (HMPRO)
In line with estimate
HMPRO reported a 2Q13 net profit of Bt730m, up by 24% YoY and 6% QoQ. The figure was only 3% above our estimate and was 3% below the Bloomberg consensus.
Results highlights
Sales jumped 23% YoY to Bt9.7bn, driven by 8% SSSG and the addition of seven new stores during the past four quarters. This strong sales growth would appear to confirm our thesis that HMPRO is resilient to the current consumption spending growth slowdown.
Gross margin expanded by 67 bps YoY and 118 bps QoQ to a record high of 27.2%, boosted by a rising proportion of private labels and other high-margin products in the sales mix. However, EBIT margin was flat both YoY and QoQ, due to pre-operating expenses for Mega Home and overseas expansion.
Outlook
3Q13 promises to be even stronger in terms of YoY growth, thanks to the very low base set by 3Q12, due to cannibalization (at stores in Bangna and Hadyai) and concerns that there might be another round of flooding during that period last year.
Besides strong growth momentum, another catalyst to boost sentiment toward the stock in the short-term would be a huge gain of around Bt1.6bn from spinning off Hua Hin Market Village to a property fund in 4Q13 or 1Q14.
What’s changed?
Our earnings forecast stands unchanged.
Recommendation
HMPRO’s strong sales and earnings growth momentum in the face of slowing consumption growth makes it one of the best plays in Retail space. There is scope for upside to our FY13 earnings projection. We maintain our BUY rating with a YE13 target price of Bt13.90.