Homeritz’s earnings surprise on the upside

PETALING JAYA: Inflationary pressures from a high interest rate environment are anticipated to put a dent in Muar-based furniture manufacturer Homeritz Corp Bhd’s earnings in the near term.

Public Investment Bank Research (PIVB Research) said it remains cautious on the group’s near-term outlook as it expects interest rates to remain elevated on high inflationary pressures.

“We believe this would continue to dampen furniture demand going forward. Despite the challenging near term outlook, we are still optimistic about the group’s long-term prospects, stemming from its commitment to developing new products and innovative designs to cater to a more diverse customer base,” the research house added.

PIVB Research, which is reiterating its “neutral” call on Homeritz with an unchanged target price of 51 sen, said the company is also actively looking to streamline its costs by diversifying into a wider network of suppliers, which should help to lower input costs.

The furniture maker is mainly engaged in the design, manufacture and sale of upholstered furniture.

Homeritz’s first quarter financial year 2024 (1Q24) headline net profit increased by 43.4% year-on-year (y-o-y) to RM9.1mil, primarily attributed to higher sales volumes due to festive spending. After adjusting for non-core items, the company’s core net profit came in at RM8.2mil, up 36.2% y-o-y.

PIVB Research said the results were above both its forecast and consensus estimates by 32% and 31%, respectively. The difference in its forecast was due to the higher-than-expected sales volume in the Asia region.

While the group has been actively participating in furniture exhibitions in Germany, Vietnam and China to strengthen relationships with existing customers and seek new ones, PIVB Research thinks that it is not likely to have any meaningful impact on earnings for the time being.