KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) has cut health and wellness direct selling company DXN Holdings Bhd's earnings forecast for the financial year ended Feb 28, 2025 until 2027 (FY25-27) following weaker results in the first half of FY25.
The research firm said the core net profit of RM148 million, which fell 14 per cent from the same period last year, met 39 to 40 per cent of its own and consensus' forecasts due to higher-than-expected staff and shipping costs as well as an unfavourable foreign exchange rate.
Therefore, it cut DXN's FY25-27 earnings by 13 per cent, 6 per cent, and 4 per cent.
It also reduced the target price to 88 sen from 93 sen previously while maintaining the "buy" call.
However, RHB Research is optimistic over the outlook, supported by the company's strategies to deepen penetration in existing markets, and new market expansion should continue to foster growth, supplemented by new product launches.
"DXN's earnings growth will be supported by the relentless growth momentum in major markets.
"Core strategies to recruit new members and enhance members' productivity will continue to revolve around member engagements, complemented by the quality of new product launches," it said in a research note.
As for DXN's recent capacity expansion, RHB Research said it should help capture the rising demand and roll out new product categories to broaden the addressable markets.
In addition, the firm said that the consequent efficiency gain, together with annual price adjustments, will sustain the high gross profit margin (GPM) of about 80 per cent despite the rising input and overhead costs.
"We also look forward to the results from the entry to Brazil, leveraging on DXN's established existing network in the Latin American region.
"We expect significant earnings contribution from this venture in three to four years' time," it added.
RHB Research stated that the company's valuation remains attractive considering the effective business model, Brazil expansion as a medium-term growth driver, and sturdy balance to facilitate a generous dividend pay-out.