{"id":323037,"date":"2023-05-05T01:49:11","date_gmt":"2023-05-04T17:49:11","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323037"},"modified":"2023-05-05T01:49:12","modified_gmt":"2023-05-04T17:49:12","slug":"stock-in-focus-wilcon-depot-wlcon-5-may-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-5-may-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 5 May 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>WLCON<\/td><\/tr>
Company Name<\/strong><\/td>Wilcon Depot Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>5 May 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Hold<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 36.40<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite WLCON still possessing upside at our Target Price of P36.40, we would advise investors to HOLD for now given the risks pertaining to future margin expansion. Operating performance may also continue to be affected by the company\u2019s rising costs.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

WLCON’s 1st quarter (1Q) 2023 earnings accounted for 22.4% and 21.9% of our and consensus estimates, respectively. We note, however, that the bottomline was supplemented by higher-than-usual \u201cOther Income\u201d which stemmed from supplier support of P170-Million. As a percentage of sales, supplier support came in at 2.0%, 130bps higher than last year\u2019s 0.7%. If we were to adjust supplier support relative to sales down to the more normal levels seen last 1Q 2022, then net income would account for only 20.4% of our forecast which would mark an underperformance.<\/p>\n\n\n\n

The more muted performance this 1Q 2023 is a result of higher OPEX and milder operating leverage. Although sales grew by double digits at 11.4%, this was lower than the 14.6% which we saw a year ago. The slowing trend in sales is evident particularly in the company\u2019s same-store sales growth (SSSG) which came in much lower this year at only 3.3%. Management attributes this to the high base given that all quarters in 2022 saw heavy acceleration in same store sales. But in our view, this may also indicate that the pipeline of pent-up construction demand is already running its course. <\/p>\n\n\n\n

On another note, WLCON was still able to post continued improvement in gross margins (+110bps). Given the continued reopening in China however, we believe that WLCON\u2019s ability to expand gross margins will be challenged moving forward as competitors will now have access to more items that can compete with WLCON\u2019s in-house\/exclusive brands. This would in turn prevent the company from substantially raising prices.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>