{"id":325716,"date":"2023-11-15T22:19:53","date_gmt":"2023-11-15T14:19:53","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325716"},"modified":"2023-11-15T22:19:55","modified_gmt":"2023-11-15T14:19:55","slug":"stock-in-focus-wilcon-depot-wlcon-15-nov-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-15-nov-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 15 Nov 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>15 Nov 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 23.40<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We cut our 2023 net earnings estimates by 12% to Php3.5 billion and downgraded our target price (TP) for WLCON by 15% from Php27.40 to Php23.40. Nonetheless, we still rate WLCON a BUY on account of its market leadership and long-term potential. <\/p>\n\n\n\n

WLCON is also trading cheaply at a PE of 23.6x, lower than its 5-yr average of 33.0x albeit slightly higher than its closest peers\u2019 average PE of 16.9x. Our Target Price offers an attractive share price upside of 14.7% and a total return potential of 16.6% inclusive of 2023 dividend yield of 1.8%.<\/p>\n\n\n\n

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

WLCON delivers disappointing results<\/h3>\n\n\n\n

Wilcon Depot (WLCON) booked 9-month (9M) 2023 net income of Php2.7 billion, 8% lower year-on-year (y\/y), falling below our expectations. Consolidated net sales grew 5% y\/y to Php25.9 billion driven by the contribution of new store additions, while tempered by a -2.1% same-store sales growth (SSSG) on softer demand. Topline was also supported by a 3.5% growth in ticket size but was offset by a 5.4% decline in transaction count. <\/p>\n\n\n\n

Gross profit grew 7% to Php10.2 billion on a 60bps margin expansion to 39.5% attributed to an increase in in-house and exclusive brands\u2019 margins, despite a slight drop in its contribution to net sales to 50.9% from 51.1%. EBIT declined 9% to Php3.7 billion as operating expenses grew faster at 18% to Php7.0 billion, driven by expansion-related expenses.<\/p>\n\n\n\n

Exploring smaller formats<\/h3>\n\n\n\n

Home depot format\u2019s sales increased only 4% to Php25.0 billion, while the home essentials sales grew 19% to Php549 million, and project sales surged 75% to Php368 million. Owing to its flattish growth, home depot\u2019s contribution to sales decreased by 80bps to 96.5%, while home essentials\u2019 contribution grew by 20bps to 2.1% and projects up by 60bps to 1.4%.<\/p>\n\n\n\n

Demand for home improvement and finishing supplies remain soft on inflationary pressures and high base, but the launch of Do It Wilcon supported the growth of smaller formats, while project sales surged on the resumption of projects by developers.<\/p>\n\n\n\n

2023\/2024 expectations lowered<\/h3>\n\n\n\n

WLCON has been historically strong on the 3rd quarter (3Q) but delivered lower-than-expected results this year due to soft demand and higher expenses. We thus cut our sales forecast for 2023\/2024 by 7%\/10% to Php35.0 billion\/ Php38.5 billion on lower home depots and home essentials sales projection. <\/p>\n\n\n\n

We also cut our gross profit expectations by 8%\/ 11% to Php14.0bn\/ Php15.6bn on a 30bps\/ 41bps margin decline to 40% and 40.4% on more manageable expectations. We reduced our EBIT by 11%\/ 14% to Php5.3bn\/ Php5.9bn on a 66bps\/ 61bps margin
reduction to 15.1%\/ 15.4% on higher expansion-related expenses. We lowered our net income forecasts for FY23\/ FY24 by 12%\/ 15% to Php3.5bn\/ Php4.0bn. Our revised 2023 earnings estimate is 8% lower y\/y.<\/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>