Home Product Center

Home Product Center Plc (HMPRO)

Beat our estimate: HMPRO reported a 4Q11 net profit of Bt618m, which overshot our estimate by 14.4% and the consensus by 7%, due to fatter-than-expected gross margin and other income.
Results highlights: The top-line rose by 13.5% YoY and 8% QoQ because the impact of the five new outlets (two stores opened in 1H11 and three more in 2H11) and a post-flooding demand surge more than offset the effect of revenue lost from eight locations that were shuttered during the inundation. 
4Q11 SSSG came to only 4% YoY because about half the revenue from second phase of the Homepro Expo (Dec 10-16) was held over to be booked to the 1Q12 accounts—income was booked to delivery dates instead of sales dates. Excluding expo revenue, 4Q11 SSSG would be 8%. Gross margin came to 26.17% (up 107 bps YoY), which significantly exceeded our estimate of 25.66% because of merchandise mix adjustments that increased the proportion of high-margin items and due to the shifting of some expo revenue to the 1Q12 accounts (expo sales normally yield slimmer margins than conventional sales).
HMPRO will post an XD sign on April 17 for a DPS of Bt0.15; payment on April 27.
Outlook: Ongoing post-flooding reconstruction demand will continue to buoy earnings in 1Q12. We also expect HMPRO to sustain robust YoY earnings growth through FY12, driven by an aggressive expansion plan and a rising proportion of house brands in the merchandise mix.
What’s changed? We maintain our FY12 earnings forecast and YE12 target price unchanged for the moment.
Recommendation: Our BUY rating stands with a YE12 target price of Bt12.60 premised on a robust earnings profile and good prospects and ongoing business expansion.