Rate cuts expected to lift Wilcon Depot

HOME design retailer Wilcon Depot Inc.’s growth will likely receive a boost from a construction sector rebound arising from anticipated interest rate cuts, Maybank Investment Banking Group said.

“[W]e believe Wilcon is primed to capture the growth in the Philippine infrastructure story, which should be further accelerated by favorable policy interest rates in 2H24 (the second half of 2024),” Maybank said in a report last week.

“This, in turn, should spur momentum in the residential segment and consequently drive demand for home-improvement products,” it added.

Wilcon was forecast to deliver net income growth of 19 percent and 12 percent this year and the next, respectively, due to higher revenues, new store openings, and steady same-store sales growth of 6.0 percent.

In the first nine months of last year, the retailer saw net income slip by 7.9 percent to P2.73 billion from P2.96 billion on higher operating expenses, which had risen by 17.6 percent to P7.04 billion from P5.98 billion the year before.

Nonetheless, Maybank still considers Wilcon the “top pick” in the country’s home-improvement retail space, given its “strong brand equity, pricing power, expansive store network, and robust execution ability.”

“We see earnings upside from faster-than-expected construction of new stores, gross margin expansion from low-cost inventories, and [a] resumption of the cyclical construction cycle,” it noted.

Construction works in the fourth quarter of last year, Maybank continued, would be at par with that of the preceding quarter — an 18-percent drop was recorded from a year earlier — as consumers had focused on staples and discretionary spending.

“We anticipate construction to pick up at the beginning of 2H24, when we expect policy rates to start declining,” the bank added.

Wilcon offers products to consumers via two retail formats — Wilcon Depot and Wilcon Home Essentials.

As of end-2022, it had 80 stores operating across the country, 74 of which were depots, according to data from the Securities and Exchange Commission.

Wilcon shares closed down 5 centavos, or 0.22 percent, at P22.95 each last Friday.