{"id":323111,"date":"2023-05-09T08:21:15","date_gmt":"2023-05-09T00:21:15","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323111"},"modified":"2023-05-09T08:21:17","modified_gmt":"2023-05-09T00:21:17","slug":"stock-in-focus-wilcon-depot-wlcon-9-may-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-9-may-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 9 May 2023 by RCBC 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>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>9 May 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 33.80<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We retain our target price (TP) of Php33.80 based on our valuations and reiterate our BUY recommendation for WLCON on the grounds of continued margin expansion and further growth from new store additions. Our Target Price implies a share upside of 19.20% and a total return of 20.60% including a 12-month dividend yield of 1.40%.<\/p>\n\n\n\n

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

1Q 2023 earnings performance<\/strong><\/p>\n\n\n\n

WLCON 1st quarter (1Q) 2023 net income ended at Php962 million, 13% higher year-omn-year (y\/y), but lower than our estimates on lower-than-expected sales and faster opex growth on expansion-related expenses. WLCON booked 1Q 2023 net sales of Php8.5 billion, 11% higher y\/y on a moderate 3.3% same-store sales growth (SSSG) and contribution of new stores. Gross profit (GP) climbed 15% to Php3.4 billion on 110bps margin expansion to 39.4%. Operating expenses jumped 22% to Php2.2 billion driven by expansion-related expenses and translated to a flattish operating income of Php1.2 billion.<\/p>\n\n\n\n

SSSG moderates amid tapering demand<\/strong><\/p>\n\n\n\n

3.3% same-store sales growth (SSSG) in 1Q 2023 was slower than the 8.6% SSSG in 1Q 2022 due to factors such as moderating demand from the high base last year (higher transactions from pent-up demand – i.e. resurgence of private construction) and economic trends of high interest and inflation rates which tempered construction from the property sector. Transaction count was down 1% y\/y due to softening demand while ticket size still grew 4.4%, albeit slower than last year\u2019s 12.7%. Some cannibalization from close branches (i.e. Central Luzon) also affected transaction count and SSSG. Nonetheless, management is keen on a mid-high single digit SSSG growth for the full year.<\/p>\n\n\n\n

Continued GPM expansion and high vendor support<\/strong><\/p>\n\n\n\n

Despite slower sales, GP margin (GPM) growth of 110bps to 39.4% (vs. 1Q 2022: 38.3%) brought WLCON\u2019s profitability higher y\/y and q\/q. This was made possible by the higher contribution of higher-margin in-house and exclusive brands, partly offset by its mildly lower contribution to total sales at 50.4% (1Q 2022: 51.2%). Operating income was also boosted by higher vendor support (incentives from discounts\/ promotions ran); and more than compensated for higher expenses.<\/p>\n\n\n\n

Neutral on competition; may ramp up store expansion plans<\/strong><\/p>\n\n\n\n

WLCON is confident in maintaining its leading position in the market despite the resurgence of its competitors, following the easing of supply chain bottlenecks, because it operates on a larger scale than most competitors. Aside from that, they are able to hold high inventory levels as their product offerings have low obsolescence tendencies. Moreover, WLCON will continue to grab untapped markets as it continues to expand its store network; with the addition of 2 more home depots in 1Q23, ending the quarter with 85 stores. WLCON is seeing a good contribution of new stores to topline so management may increase store openings to 11 (previous guideline at 8-10 stores).<\/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>