Bualuang Securities (BLS) has issued a downgrade recommendation for the home improvement sector, shifting its stance to SELL due to deteriorating fundamental factors linked to declining consumer purchasing power. The sector faces multiple challenges that are impacting its performance.
Primarily, a significant drop in the launch of new property projects—over 50% quarter-on-quarter—has been observed, exacerbated by an earthquake and an early rainy season by two months, directly affecting foot traffic and purchase reservations. Additionally, political uncertainties are delaying government budgets, stalling infrastructure projects. The competitive landscape between online and offline markets further pressures pricing.
Key reasons for the downgrade include:
1) Same-store sales (SSS) figures in May 2025 have worsened compared to April, averaging -8.4%, while quarter-to-date stands at -8%. Notable declines were seen in GLOBAL (-14%), HMPRO (-10%), ILM (-5%), and DOHOME (-4%).
2) Given these developments, BLS has revised its 2025 SSS predictions downwards from initially expected year-on-year flat growth to declines in GLOBAL (-10%), DOHOME (-5%), HMPRO (-5%), and ILM (-5%).
3) Consequently, BLS has adjusted its full-year 2025 profit forecasts downwards by an average of 10%, with DOHOME seeing a reduction of 26%, GLOBAL 16%, HMPRO 10%, and ILM 5%.
4) The home improvement sector appears to have entered a mature phase, with growth slowing. With companies such as HMPRO and GLOBAL operating over 150 branches and opening just 5-10 new locations each year (a mere 5-7% growth), the sector’s once robust expansion has tapered. As a result, BLS views the previous PE multiples of 20-30 as inflated. With expected profit drops averaging 10%, the adjusted PE multiple now ranges between 10-12, with a revised target at 11.5 times, reflecting a decrease of 2 standard deviations from the sector’s average.
Revised target prices are:
- DOHOME: THB 2.60, downgraded from BUY to SELL
- GLOBAL: THB 4.00, maintaining SELL
- HMPRO: THB 5.35, downgraded from BUY to SELL
- ILM: THB 11.50, maintaining SELL
BLS remains cautious, noting potential downside risks as the market might outperform expectations by 10-15% per stock. Nonetheless, profit forecasts for the second quarter predict declines both year-on-year and quarter-on-quarter, leading to an overall UNDERWEIGHT recommendation for the sector.
