CGS International Securities (Thailand) (CGSI) expresses a neutral view on Home Product Center Public Company Limited (SET: HMPRO) following an analyst meeting with management. While a quarter-on-quarter earnings recovery is anticipated for the second quarter of 2026, the underlying quality of this rebound appears weak.
HMPRO stated that same store sales growth (SSSG) for HomePro in April showed a slight positive trend, while Mega Home’s SSSG was in the mid-single digit range. However, CGSI believes that these improvements were largely driven by a low comparison base from the previous year, unusually hot weather, increased demand for cooling products, and stockpiling of building materials, which do not signal a broader recovery in overall home improvement demand.
Looking ahead, management’s guidance for full-year 2026 SSSG now appears softer. Growth for the year is likely to be flat or even slightly negative, compared to previous expectations for modest positive growth. The brokerage noted that a potential earnings rebound in 2Q26 may not be strong enough to fully offset the sharp decline seen in the first quarter, and demand visibility remains weak heading into the second half of the year.
On a positive note, gross margin protection is highlighted as HMPRO’s main strength. Management expects gross margins to hold up well, supported by recent price adjustments, expanding private-label offerings, a push for higher-margin product lines, and the benefit of older-cost inventory. While some margin upside is possible for the second quarter, CGSI cautions against over-optimism, citing the risk of a less favorable mix from electrical appliance sales and the introduction of higher-cost inventories later in the year.
Mega Home benefited from strong sales momentum during March and April, mainly as contractors and customers advanced purchases in anticipation of rising material prices. However, this is seen as a temporary boost, with the brokerage warning of potential payback risk as the effect of stockpiling fades, and the start of the rainy season could slow activity.
While HMPRO remains confident about controlling margins and costs, the company is less optimistic about demand recovery. Risk has shifted from margin pressure to challenges in driving revenue growth, especially in the third and fourth quarters of 2026 if construction costs remain high and consumer sentiment weakens further, potentially delaying new home improvement projects.
Additionally, management acknowledged persistent challenges in Malaysia, such as weak brand recognition, limited scale, and slower operational execution. Although the business remains profitable, CGSI notes it is unlikely to significantly contribute to the group’s overall growth, as the company’s focus remains on the Thai market.
