KUALA LUMPUR: Homeritz Corporation Bhd's fourth-quarter results for FY24 reveals ongoing cost pressures and a cautious outlook for FY25, according to Public Investment Bank Berhad (PublicInvest).
The research firm highlighted that Homeritz's net profit for the quarter fell by 14.3 per cent year-over-year to RM6.8 million, largely impacted by rising operating costs and moderating demand.
Nevertheless, after adjusting for non-core items, core profit showed a 13 per cent year-over-year increase, reaching RM8.2 million.
The FY24 results aligned closely with market expectations at 104 per cent and slightly surpassed PublicInvest's projection at 108 per cent.
Revenue in the fourth quarter saw a 22.8 per cent year-over-year boost, totaling RM56.5 million, fueled by a robust export market and the addition of new clients.
Nevertheless, the bank noted that the overall sales volume declined quarter-over-quarter across all regions attributed to the normalisation of demand following restock activities by U.S. customers in the prior quarter, leading to a dip in the company's utilisation rate to 40-50 per cent from 60 per cent in 3QFY24.
Despite the YoY increase in revenue, pre-tax profit declined by 12 per cent to RM9.2 million due to a substantial rise in operational costs, which were up by 40–50 per cent YoY.
This cost surge impacted Homeritz's profit before tax (PBT) margin and net profit margin, which decreased by 6.4 per cent and 5.2 per cent respectively.
The investment bank expressed a cautious outlook for FY25 due to ongoing cost pressures where the minimum wage hike to RM1,700, introduced in the 2025 Budget, and rising leather prices—a key raw material—are expected to weigh on expenses.
Even with the strengthening of the ringgit against USD, Homeritz's exposure to current fluctuation is minimal as the company can transfer costs to customers, particularly through shorter-term order flows, it said.
"Nevertheless, we remain optimistic about the group's ongoing initiatives, particularly its active participation in furniture exhibitions to attract new clientele," the bank noted.
PublicInvest maintains a "Neutral" rating for Homeritz, with a slightly higher target price of 62 sen, based on a rolled-forward valuation of FY25 and a 9x price-to-earnings multiple.