{"id":328038,"date":"2024-05-24T01:47:54","date_gmt":"2024-05-23T17:47:54","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=328038"},"modified":"2024-05-24T01:47:56","modified_gmt":"2024-05-23T17:47:56","slug":"stock-in-focus-wilcon-depot-wlcon-24-may-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-wilcon-depot-wlcon-24-may-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Wilcon Depot (WLCON) – 24 May 2024 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>24 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 23.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Valuations-wise, WLCON is already very cheap with a Price-Eranings (P\/E) ratio of 24.5x that is already at 1sd below its historical mean, therefore implying that negatives from prior earnings have already been priced in. For patient investors, the stock could therefore be a long-term buying opportunity given its status as a potential turnaround story down the line.<\/p>\n\n\n\n

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

Quarterly housing construction may be climbing from the bottom<\/h3>\n\n\n\n

Quarterly construction permit figures for single-houses and duplex housing show that on a year-on-year (YoY) basis, the number of units in the pipeline for construction still continues to shrink. Relative to 1Q 2023 levels, single housing construction permits dropped by 16.2% while duplex housing fell by 27.4%.<\/p>\n\n\n\n

Simultaneously, the numbers seemed to indicate that homeowners were now opting for smaller sized units, as indicated by the shrinkage in average floor area per building for both housing categories. Nevertheless, some positives can also be gleaned from the data when viewed from a sequential perspective. While lower than last year\u2019s marks, 1Q24 data showed improvement versus the prior quarter. <\/p>\n\n\n\n

Although the average sizes of units for both housing types maintained their descent, this was made up for by an increase in volumes as construction permits for single housing grew 12.4% QoQ, while duplex housing climbed 12.1% sequentially. All in all, the increase in houses that are due for construction (as indicated by the permit figures) translated to an overall rise in total floor area to 2.8-Mn sqm for single housing (+6.4%) and 41.1k sqm for duplex housing (+13.4%).<\/p>\n\n\n\n

Still foggy, but banking on year-end improvement<\/h3>\n\n\n\n

The figures that we are seeing so far indicate that the demand outlook for WLCON\u2019s products may potentially start to strengthen in latter Q3 to Q4. As we have said in the past, WLCON primarily deals in the finishing stages of construction and given that the average time to build a new house in the PH is slated to be at around 6 to 7 months, we are therefore expecting the QoQ improvement to reflect sometime during these quarters. <\/p>\n\n\n\n

While the shrinking sizes of homes is a concerning trend as this may impact purchases of WLCON products on a per-home basis, the growing number of housing units in the pipeline nevertheless still lends hope to the increasing possibility that WLCON may finally see sequential improvement in overall sales towards the back-half of the year, driven by the sheer increase in new housing constructions. <\/p>\n\n\n\n

To be clear though, it is still highly likely that topline and earnings will remain weaker YoY. But hopefully, the potential QoQ ascent that we are seeing in demand coupled with future tempering in OPEX stemming from lower inflation, would allow Q3\/Q4 earnings to meet analysts\u2019 already downgraded expectations, especially as these quarters will be coming from very low bases. Note that despite the 23.1% drop in Q1 earnings, these results were actually more or less in line with Bloomberg estimates.<\/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>