Padini’s sales and profitability may improve

KUCHING: Padini Holdings Bhd’s (Padini) sales and profitability can improve starting from the third quarter of financial year 2022 (3QFY22) onwards, analysts opine, given that the group is well-positioned to recover post-pandemic due to its value proposition products and strong balance sheet.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) opined that the retail business will improve as the economy is starting to reopen.

“We think current supply chain disruption, increase in material costs, hike in freight charges and other inflation related issues will slowly subside,” MIDF Research said.

“We are still optimistic that Padini could return to profit for the remaining quarters of the financial year as management plans to continue providing value for money products and implement measures to control costs, optimise working capital, preserve cash and streamline its operations.”

Looking ahead, MIDF Research expect sales and profitability can improve starting from 3QFY22 onwards, unless the situation of the pandemic worsens (with the emergence of new variant of concern, the latest being Omicron) and dampen the economy.

“We think Padini is wellpositioned to recover post-pandemic due to its value proposition products and strong balance sheet.”

Meanwhile, since the economy has gradually reopened amid high vaccination rate, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) expects strong sales ahead in the coming quarters.

According to Kenanga Research, this is due to usual end-of-the year demand and two major festivities ahead; Chinese New Year and Hari Raya.

“Margins would still be a challenge due to supply chain issue but we expect margins to improve moving into the second half of financial year 2022 (2HFY22),” the research arm said.

Post 1QFY22 results, Kenanga Research’s FY22E-FY23E earnings of RM95 million RM140 million remained unchanged with impact of the Prosperity Tax likely to be minimal given the presence of several business units in its corporate structure.

On the other hand, MIDF Research took a more conservative stance and reduced FY22-23-24F revenue and earnings estimates downward by between 3.3 per cent to 3.8 per cent.

As such, MIDF profit after tax estimates for Padini’s FY22E, FY23F and FY24F have been adjusted to RM95.8 million, RM128 million and RM156.8 million, respectively.