Analysis

First Quarter 2021 (1Q21) Profits Jump 15% to Php 2.0 Billion

PGOLD recorded a 15%n increase in net income to P2.0 Billion in 1Q 2021, after both Puregold and S&R stores delivered better margins. Revenues slipped 8% to P37.7 Billion, weighed by lower foot traffic. Meanwhile, cost of sales improved 10% to P30.5 Billion on the back of stronger supplier support. In terms of margins, EBITDA margin saw a marked improvement, up 2 percentage points (pp) to 11.8%, while net profit margin rose 1pp to 5.4%.

A Mixed bag for SSSG, Traffic, and Ticket

Puregold’s contribution to total sales dropped to 72% from 77% after same-store sales growth (SSSG) and same-store traffic growth contracted 15% and 38%, respectively, because of various lockdown measures. For S&R, SSSG remained buoyant, up 9% while traffic growth recovered to 5% from a decline of 4% in the first quarter of 2020.

Recommendation

We maintain our BUY rating but we cut our Target Price (TP) to P54.20 per share, from our previous Target Price of P57.60 per share, after we project full-year 2021 estimated (FY21E) revenues to slightly decline by 2% to P179.0 Billion. Nonetheless, PGOLD’s aggressive store rollout plans should translate to faster organic growth and further margins uplift.

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