- Sheng Siong (SGX:OV8)’s 3Q23 net profit of S$35m (+6% y-o-y) was in line, with 9M23 net profit forming 75%/74% of our/Bloomberg consensus’ FY23F forecasts. Revenue grew to S$346m in 3Q23 (+4% y-o-y), driven by improved same-store sales (+2% y-o-y) and contribution from new stores (+2% y-o-y).
3Q23: Margins holding up well
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- Operating profit margin was flattish at 11.4% (-0.1% points y-o-y) in 3Q23F, improving vs 1H23 (-1.1% points y-o-y), which we attribute to better pass-through of business costs.
Deftly navigating business challenges
- We forecast FY23F gross profit margin at 30.1% (+0.7% y-o-y) as Sheng Siong continues to leverage on its strong procurement capabilities to secure price competitive supplies to navigate industry competition, especially in the fresh goods category.
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- We also understand that Sheng Siong has recently renewed its electricity contract at tariffs ~20% lower vs previous year, which could help ease overall escalation of operating expenses.
New store tenders by HDB remains slow year-to-date
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