KUALA LUMPUR: CGS-CIMB Research expects Bonia Corporation Bhd to record solid earnings momentum in the second half (2H) of the financial year 2023 (FY23) despite high inflationary pressures.
The research firm said this would be driven by the company's strong brand equity, given product launches, effective marketing campaigns and a growing loyal customer base.
"Also, 2H FY23 sales could be driven by festive sales (Chinese New Year and Hari Raya) and its ongoing store expansion, as the company plans to open two to three new boutique outlets (four per cent of its total boutiques) with attractive designs in FY23.
"We also expect margins to continue to improve on higher economies of scale from wider product offerings, better product mix from sales of higher-margin products and potential average selling prices hikes," said its analyst Walter Aw in a note.
Bonia's 1H FY23 net profit came in at RM31.5 million, above CGS-CIMB Research's expectations at 70 per cent and 78 per cent of Bloomberg consensus.
The better earnings in the second quarter (Q2) of FY23 were due to stronger-than-expected sales and higher-than-expected margins, likely thanks to its ongoing price adjustments from selling price hikes and more profitable product mix, higher store count, and greater economies of scale.
Bonia declared an interim dividend of two sen for Q2 FY23, bringing a cumulative FY23 dividend to four sen per share.
"Bonia's Q2 FY23 earnings rose 22.2 per cent quarter-on-quarter to RM112.1 million thanks to its ongoing store expansion and relocation to areas with higher footfall, price hikes, new product launches, effective omnichannel strategy, and festive seasonal sales (year-end sales and
Christmas sales).
"Note that Q2 of its financial year is also typically its strongest quarter," it said.
CGS-CIMB Research raised its FY23-FY25 earnings per share by 21.4-24.7 per cent to account for higher revenue and margin assumptions.
The research firm reiterated its 'Add' call on the stock with a target price of RM3.50.