More cheers expected in FY22

■ FY21 core net profit of RM252m (+38% yoy) beat estimates, due to higher than-expected sales volume and better-than-expected margins in 4Q21.
■ We expect HEIM to post stronger results in FY22, thanks to: i) better sales volume (mainly on-trade), ii) price hikes and iii) higher economies of scale.
■ Maintain Add, with a higher DDM-based TP of RM28.00.

FY21 core net profit rose 38% yoy; beat estimates

4Q21 core net profit came in at RM100m (+42% yoy), after adjusting for one-off losses of RM3.7m (mainly write-off of inventories). This brought FY21 core net profit to RM252m (+38% yoy), which beat estimates (122% of our and 111% of Bloomberg consensus FY21 estimates). The earnings beat in 4Q21 was owing to stronger-than-expected sales volume and better-than-expected margins (higher economies of scale and better cost control). HEIM announced an interim dividend of 66 sen/share, bringing FY21 dividend to 81 sen/share (99.6% payout ratio); within expectations.

4Q21: Stronger qoq mainly thanks to lifting of lockdown measures

On a qoq basis, 4Q21 revenue and core net profit rose by 78% and 91%, respectively. This was owing to higher sales volume (especially on-trade sales) from the lifting of lockdown measures and festivities in the quarter. HEIM also recorded 1.0% pts qoq growth in 4Q21 EBIT margin to 18.6%, which we attribute to: i) price increases during the quarter, ii) higher economies of scale and iii) ongoing cost optimisation strategies.

Expect even better FY22 from higher sales volume and price hikes

We expect HEIM to record stronger results from FY22 onwards. This will mainly be driven by higher sales, especially from on-trade sales channels, thanks to the lifting of lockdown measures and more consumer footfall. In addition, we expect HEIM to benefit from more marketing activities as well as new product launches.

Also expect margin expansion in spite of higher input costs

Despite the recent surge in input costs, we do not expect this to negatively impact margins. On the contrary, we expect HEIM to record better margins, thanks to: i) price hikes (5% to 10% since 4Q21), ii) higher economies of scale and iii) better cost efficiencies. In addition, we believe HEIM will also record better margins from a more profitable sales mix, as we are of the view that on-trade sales (estimated to be 60% of total sales pre Covid-19 pandemic) have better margins compared to off-trade sales.

Maintain Add, with a higher DDM-based TP of RM28.00

We raise our FY22-23F EPS to account for higher sales volume and better cost control. We also introduce our FY24 EPS forecast. We keep our Add call with a higher DDM-based TP of RM28.00. We continue to like HEIM for: i) its attractive valuation (CY22F P/E is at a 20.1% discount to its 5-year mean of 27x), ii) benefits from a recovery in economic activity, especially on-trade and iii) strong brand equity. We also like HEIM’s attractive dividend yields of 4.7-6.3% (FY22-24F).