RHB Investment Bank Bhd (RHB Research) has maintained a BUY recommendation on DXN Holdings Bhd despite DXN recording weaker-than-expected earnings for the first half of the financial year of 2025.

The call reflects the belief that DXN's growth potential remains intact, bolstered by its solid business model and expansion into new markets.

Additionally, DXN's core strategies are expected to drive future growth as the company remains focused on expanding its member base and enhancing member productivity through ongoing engagements and product innovation. Recent capacity expansions are also seen as a positive move to meet rising demand and broaden its market reach with new product categories.

In the medium term, DXN's expansion into Brazil is expected to be a key growth driver. Leveraging its established network in Latin America, the group is looking to capitalise on opportunities in the Brazilian market, with significant earnings contributions anticipated within the next three to four years.

DXN's ability to sustain its high gross profit margin of around 80% is also a notable strength, despite rising input and overhead costs. Annual price adjustments and efficiency gains from its expansion efforts are expected to mitigate these cost pressures. The group's balance sheet remains robust with net cash of RM521 million, positioning it well to continue its generous dividend payouts.

In light of these factors, RHB Research's target price reflects a valuation based on an 11 times price-to-earnings ratio for FY26F, which is below the sector average due to the regulatory environment in the direct selling industry.

However, with a strong business model, growing market presence and strategic expansions, DXN is well-positioned for long-term growth.