Margins pressure from :
Near term headwinds but positive on long-term outlook. New stores opening and product innovations will continue to drive topline growth. The new factory will increase production capacity (in terms of variety and volume) to fuel their expansion strategy, and improve its margins via (a) enhanced manufacturing efficiencies and (b) cost savings from bulk purchasing.
Maintained Buy with unchanged DCF-derived TP of S$0.98
We have increased our FY18e sales growth expectation to 7.2% YoY from 4.2%. However, we have also trimmed our FY18e/19e gross margins by 20bps/5bps to 61.5%/63.0% respectively. Our investment thesis remains intact – successful integration with the adjacent new factory would be the inflection point for OCK.