KUALA LUMPUR (Feb 28): Shares of Mr DIY Group (M) Bhd (KL:MRDIY) slid in early morning trade on Friday, after its most recent quarterly results prompted analysts to cut their outlook, with at least one citing that the stock is "no longer" an industry favourite.

Mr DIY shares fell 8% or 12 sen to trade at RM1.46, valuing the group at some RM14 billion.

Maybank Investment Bank (Maybank IB) has warned that “Mr DIY’s outlook has turned challenging”,  citing slowing sales momentum on a per-store and per-square-foot basis, along with operating cost overruns that are expected to weigh on earnings growth in the current financial year ending Dec 31, 2025 (FY2025).

“This suggests that Mr DIY’s new store growth target has outpaced the growth in consumers’ propensity to spend,” the research house said in its report.

As a result, Maybank IB has downgraded the stock to a “hold” form a “buy”, stating that “Mr DIY is no longer one of our top sector pick”.

Adding to the concerns, the commissioning of MR DIY’s new automated warehouse has been delayed to mid-2025, with full-capacity ramp-up now targeted towards the end of FY2025.

“With this, high labour and warehousing costs are expected to continue in the near-term, “Maybank IB noted, prompting FY2025 earnings cut forecasts by 15%-16%, adjusting for weaker average store sales and rising expenses.

Among research houses covering the stock, Mr DIY has five “buy”, one “hold” and one “sell” call. Bloomberg consensus pegs in an average 12-month target price of RM2 for the stock, representing further upside from its current price.

In a separate note, Hong Leong Investment Bank (HLIB) also trimmed earnings down by 11% and 12% in FY2025 and FY2026 to account for higher operating expenses related to warehouse automation.

Nevertheless, HLIB remains "optimistic on Mr DIY’s aggressive store expansion strategy", and reiterated a “buy” call on the stock.

For FY2025, Mr DIY has raised its store expansion target to 190 new outlets, including an accelerated rollout of its KKV chain — a lifestyle retail chain from China. 

KKV, which ended FY2024 with eight stores (below the 10-store target) due to prolonged site selection, features a larger 15,000-square-foot format and generates three times the monthly revenue of standard Mr DIY stores (10,000 sq ft) due to its premium product mix.

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