Comprehensive Analysis of Home Product Center PCL Broker: UOB Kay Hian Date of Report: January 24, 2025 Overview of Home Product Center (HMPRO) Home Product Center PCL (HMPRO) is Thailand’s largest home improvement retailer, commanding nearly 40% of the modern trade market. The company’s innovative strategies and focus on operational efficiency make it a key player in the sector. Despite challenges in 2024, HMPRO is working to sustain its market position with new hybrid store formats and cost management initiatives. Performance Highlights and Financial Metrics HMPRO is projected to post a flat net profit of Bt1,690 million in 4Q24, representing a modest year-on-year (yoy) increase of 0.8% and a quarter-on-quarter (qoq) rise of 17.2%. The growth is attributed to improved gross margins, which offset escalating interest expenses. Here is a preview of key financial metrics: 4Q24 sales and services revenue is forecasted at Bt17,709 million, up by 1.8% yoy and 8% qoq. Gross profit is set to grow by 1.8% yoy to Bt5,015 million. Operating EBIT is expected to rise by 2.8% yoy to Bt1,462 million. Net profit margin is forecasted at 9.5%, showing minor fluctuations yoy. The gross margin improvement is driven by increased contributions from Mega Home private label products and the absence of significant discount sales events. Key Financial Projections Year Net Turnover (Bt Million) EBITDA (Bt Million) Net Profit (Bt Million) EPS (Bt) PE Ratio (x) Dividend Yield (%) 2023 70,166 9,292 6,442 0.5 18.3 4.5 2024F 69,287 9,556 6,414 0.5 18.4 4.4 2025F 72,342 10,068 6,698 0.5 17.6 4.6 2026F 74,924 10,552 7,027 0.5 16.8 4.8 Challenges and Opportunities Sluggish Same-Store Sales (SSS): For 4Q24, HMPRO’s same-store-sales are projected to decline by 1% yoy, despite positive overall sales growth driven by new store contributions. Competition: Intensifying competition in the retail segment is putting pressure on top-line momentum. Hybrid Store Strategy: HMPRO’s hybrid store format could significantly lower investment capex, reducing expense pressure, while allowing for operational efficiency. Store Expansion: The company plans to add 8-10 new stores in 2025, focusing mainly on the hybrid store model. Valuation and Recommendation HMPRO is currently trading at an undemanding valuation of 18x its 2025F PE, which is below its five-year mean PE band. However, the lack of strong catalysts and unexciting earnings growth prompt the analysts to maintain a “HOLD” rating for the stock. The target price is revised down to Bt10.00, reflecting a 14.3% upside from the current share price of Bt8.75. Environmental, Social, and Governance (ESG) Initiatives HMPRO demonstrates a strong commitment to sustainability with ambitious ESG goals: Environmental: The company aims to achieve net zero greenhouse gas emissions by 2050, with 2.2% of the target already achieved in 2023. It also targets 100% renewable energy use and zero waste by 2030, achieving 27.5% and 84% of these targets, respectively, as of 2023. Social: HMPRO has exceeded its goal of hiring 1,800 local talent teams by 2025, with 2,650 teams already employed. Governance: The company is committed to good governance practices, extending ethical guidelines throughout its supply chain to combat corruption. Key Drivers for Future Growth The following factors could act as catalysts for HMPRO’s share price: Recovery in same-store sales growth (SSSG) in 1Q25. Continued gross profit margin expansion. Effective implementation of the hybrid store strategy.
