{"id":324325,"date":"2023-08-04T02:09:29","date_gmt":"2023-08-03T18:09:29","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=324325"},"modified":"2023-08-04T02:09:30","modified_gmt":"2023-08-03T18:09:30","slug":"stock-in-focus-wilcon-depot-wlcon-4-aug-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-4-aug-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 4 Aug 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>4 Aug 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 27.40<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We set our target price (TP) for Wilcon Depot (WLCON) at Php27.40 based on our Discounted Cash Flow-based valuation and recommend a BUY on WLCON. Despite the lower-than-expected earnings in the 1st half (1H) of 2023, WLCON remains a strong contender in the market. WLCON is also currently trading cheaply at a PE of 22.3x, which is below its 5-year historical PE of 33.0x albeit higher than its closest peers with a median PE of around 8.7x.<\/p>\n\n\n\n

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

Earnings performance<\/strong><\/p>\n\n\n\n

Wilcon Depot (WLCON) posted 1H 2023 net income of Php1.8 billion, 2% lower year-on-year (y\/y), below consensus estimates and our own forecasts. Revenues grew 8% y\/y to Php17.2 billion mainly on higher contribution from new stores. Same-store sales growth (SSSG) was flattish at +0.2%. Ticket size grew +4.3% but was offset by the drop in transaction count by -4.3%. The home depot format contributed 97% to total sales, while 2% and 1% were of the home essentials and project sales, respectively. <\/p>\n\n\n\n

Gross profit increased by 10% to Php6.8 billion on a 90bps margin expansion to 39.5%, driven by margin improvement from the in-house and exclusive brands. Operating expenses including lease-related interest expense climbed 21% to Php4.7 billion mainly on expansion-related expenses such as depreciation and amortization and labour expenses. <\/p>\n\n\n\n

EBITDA was flattish at Php3.0 billion while operating income declined by 3% to Php2.4 billion. WLCON added a net of 2 stores for the 1H 2023 for a total of 85 stores in its portfolio.<\/p>\n\n\n\n

Outlook for 2023\/2024 <\/strong><\/p>\n\n\n\n

We remain bullish on WLCON on account of its strong brand equity and aggressive expansion plans. However, considering the high base from 2Q 2022 to the remainder of last year, we do expect muted topline growth for the year. Moreover, growth from topline and margins may be offset by higher expansion-related expenses as was seen in 1H 2023.<\/p>\n\n\n\n

We reduced our 2023\/2024 net income forecasts by 10%\/8% to factor in muted topline prospects on account of slowing foot traffic and higher base from the previous year, and higher operating expenses mainly on expansion-related operations.<\/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>