1Q22 results beat on easing restrictions
? 1Q22 core net profit of RM114m (+52.8% yoy) beat expectations, due to
larger-than-expected rise in sales volume and better economies of scale.
? We are not overly concerned about higher input costs; raw material and
packaging costs made up just 7% of its FY21 revenue.
? Reiterate Add with a higher DDM-based TP of RM29.00.
1Q22 core net profit rose 52.8% yoy; beat expectations
1Q22 revenue rose 27.5% yoy, thanks to robust growth in sales volume, as lockdown
restrictions were eased, and selling price hikes. These pushed up 1Q22 EBIT margin 4.4%
pts yoy to 22.3%, further boosted by lower marketing spend (better promotional spend
optimisation) and higher economies of scale. Accordingly, 1Q22 core net profit rose 52.8%
yoy to RM114m despite a higher tax rate of 26.9% (+3% pts yoy). At 39% of our and 41%
of Bloomberg consensus’ full-year numbers, we deem 1Q22 core net profit to be above
expectations due to higher-than-expected growth in sales volume.
Stronger qoq results thanks to better cost control and price hikes
On a qoq basis, 1Q22 revenue rose 0.9% while core net profit grew by a larger quantum
of 14.2%. In addition to our view of slightly higher sales volume, the robust qoq growth in
net profit was due to: i) lower marketing spend (marketing costs for Chinese New Year
festivities were captured in 4Q21), ii) better cost control, and iii) increase in selling prices.
HEIM should post a 18% yoy growth in sales volume in FY22F
We expect HEIM to record a robust recovery in FY22F sales volume (+18% yoy). This is
backed by the lifting of lockdown measures since 4Q21, which set the stage for a strong
recovery, especially in on-trade sales volume. This will be further boosted by the reopening
of entertainment outlets from 15 May 22 onwards. We are also encouraged by the country’s
recent border reopening, allowing foreign tourists to enter Malaysia since 1 April 22.
Higher input costs not a major concern
We are not overly concerned about the impact on margins from the recent surge in input
costs. This is because raw material and packaging costs made up just 7% of HEIM’s FY21
revenue, while we expect their impact to be mitigated by: i) price hikes (5-10% since 4Q21),
ii) greater economies of scale, and iii) better cost control. Also, HEIM should benefit from
a more profitable sales mix, as we believe on-trade sales (estimated at 60% of total preCovid-19 sales) enjoy better margins than off-trade sales.
Maintain Add with a higher DDM-based TP of RM29.00
With 1Q22 results beating estimates, we hike our FY22-24F EPS to account for higher
sales volume. We keep our Add call with a higher DDM-based TP of RM29.00 (Beta:0.8x
& g:2.7%). We continue to like HEIM for: i) its attractive valuation (CY23F P/E is at a 30.1%
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 4.4-5.7% (FY22-24F).