DISCLAIMER March 5th, 2025 HORST PUDWILL CHAIRMAN OF THE BOARD STEPHAN PUDWILL VICE CHAIRMAN FRANK CHAN CHIEF FINANCIAL OFFICER 2024 RESULTS | | 2023 | 2024 | Change | | --- | --- | --- | --- | | Sales | $13,731 | $14,622 | +6.5% | | GM % | 39.5% | 40.3% | +85 bps | | SGA % | 31.3% | 31.7% | +42 bps | | EBIT | $1,135 | $1,270 | +11.9% | | % of sales | 8.3% | 8.7% | | | Net Profit | $976 | $1,122 | +14.9% | | % of sales | 7.2% | 7.7% | | | EPS (cents) | 53.36₵ | 61.43₵ | +15.1% | | Final Dividend (HK cents) ...

Financial Data and Key Metrics Changes - The company reported a revenue increase of 6.5% to $14.6 billion, with net profit rising by 14.9% to $1.12 billion, and free cash flow reaching $1.6 billion, a 23% increase from 2023 [3][6][18] - Gross profit increased by $476 million to $5.9 billion, with a gross margin improvement of 85 basis points to 40.3% [7] - Earnings per share rose by 15.1% to $0.6143, and the total dividend for 2024 was increased by 17.1% to HK$2.26 per share [8] Business Line Data and Key Metrics Changes - The Power Equipment division, which accounts for nearly 94% of total revenue, grew by 7.3% to $13.7 billion, with operating profits increasing by 12.1% and margins improving to 9% [9] - The Floorcare & Cleaning division saw a revenue decline of 4.5% in local currency, but operating profits increased by 4.73% with margins improving to 3.2% [9][10] Market Data and Key Metrics Changes - North America, representing about 76% of revenue, grew by 5.5% in local currencies, while Europe, accounting for approximately 16% of the business, grew by over 10% [10][11] - The rest of the world, led by Australia, delivered impressive local currency growth of 12.5% [11] Company Strategy and Development Direction - The company emphasizes innovation and investment in new products, category expansion, and technology as key strategies to maintain market leadership and outperform competitors [12] - The focus on a unified team approach, leveraging the collective experience and knowledge across the organization, is seen as a competitive advantage [24][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering strong financial results, highlighting a commitment to innovation and addressing market needs [21][32] - The company aims to achieve a net cash position by 2025 and continues to focus on reducing net finance costs [19][36] Other Important Information - The company has reduced total net debt by over 95% to $45 million, with a significant reduction in floating rate debt [19][20] - The effective tax rate increased to 7.8%, but management believes this rate is sustainable mid-term [13] Q&A Session Summary Question: What are the growth opportunities for RYOBI and Milwaukee? - Management highlighted the strong growth in the cordless segment, with RYOBI achieving a 15% compounded annual growth since 2016 and Milwaukee capturing significant market share through innovative solutions [60][91] Question: How does the company plan to maintain its competitive edge? - The company plans to continue investing in technology and innovation, leveraging machine learning and AI to enhance product offerings and operational efficiency [46][93]

Group 1 - The article focuses on identifying value investment opportunities in Asia, particularly in Hong Kong, emphasizing stocks with significant discrepancies between market price and intrinsic value [1] - The research service targets deep value balance sheet bargains and wide moat stocks, which include net cash stocks, low price-to-book (P/B) stocks, and high-quality businesses [1] - Techtronic Industries Company Limited is highlighted as a bullish investment opportunity, with previous analysis noting its strong cash flow and international presence [1] Group 2 - The author provides monthly updates and watch lists for value investors, aiming to assist them in finding attractive investment opportunities in the Asian market [1]

Group 1 - TTI has joined the United Nations Global Compact, reaffirming its commitment to sustainability and social responsibility [2] - The company has been publishing ESG reports since 2015 and aligned its goals with the UN Sustainable Development Goals in 2018 [1][8] - TTI's sustainability strategy focuses on safety solutions, noise reduction, supply chain traceability, decarbonization, and governance [1] Group 2 - TTI is a global leader in cordless technology, founded in 1985, serving various markets including professional, industrial, DIY, and consumer [3] - The company employs over 50,000 people worldwide and emphasizes innovation and strategic growth [3] - TTI's brand portfolio includes well-known names such as MILWAUKEE, RYOBI, AEG, EMPIRE, HOMELITE, HOOVER, ORECK, VAX, and DIRT DEVIL [4][5] Group 3 - The Pudwill family is the largest shareholder of TTI, with significant ownership also held by institutional investors [5] - TTI is publicly traded on the Hong Kong Stock Exchange and is part of the Hang Seng Index [5] - The company is committed to environmental, social, and corporate governance standards [5]

Core Viewpoint - Techtronic Industries Company Limited (TTNDY) is expected to experience positive free cash flow growth due to working capital optimization and reduced capital expenditures, with significant growth opportunities in the EMEA region [1][6] Financial Performance - TTNDY's free cash flow increased by +69% YoY from $301 million in 1H 2023 to $508 million in 1H 2024, while top line and net income rose by +6% YoY to $7,312 million and +16% YoY to $550 million, respectively [2] - The company's net working capital to revenue ratio decreased by -400 basis points YoY to 18.7%, and capital expenditures to sales metric decreased by -160 basis points YoY to 1.4% for 1H 2024 [2] Growth Outlook - Analysts forecast TTNDY's free cash flow to grow at a three-year CAGR of +11% to $1,747 million in FY 2026 [2] - The company is likely to continue growing its free cash flow as it optimizes working capital and reduces capital expenditures [3] Geographical Expansion - In 1H 2024, only 25% of TTNDY's revenue came from markets outside North America, with significant growth potential in the EMEA region [4] - Milwaukee EMEA has shown a +23% top line CAGR from FY 2008-2023, with a Total Addressable Market (TAM) potentially increasing from $10 billion to $50 billion through product expansion [4] - Analysts anticipate a +9.2% revenue CAGR and a +180 basis points normalized net margin expansion for FY 2024-2026 [4] Valuation Metrics - The market currently values TTNDY at a consensus next twelve months' free cash flow yield of 6.3%, higher than its historical five-year mean of 4.1% [3] - The stock's consensus forward one-year normalized P/E is 18 times, below its five-year historical mean of 23 times [3]

Financial Data and Key Metrics Changes - Sales increased by 6.3% to USD 7.3 billion compared to the same period last year [5] - EBIT rose by 11.8% to USD 626 million, with EBIT margin improving by 42 basis points to 8.6% [6] - Net profit increased by 15.7% to USD 550 million, with margins improved by 60 basis points to 7.5% [6] - Earnings per share increased by 15.8% to USD 0.3012 per share [7] - Free cash flow reached a record of over USD 500 million, an increase of USD 207 million compared to the first half of 2023 [11] - Shareholders' equity increased by USD 559 million or 9.8% compared to the first half of last year [9] Business Line Data and Key Metrics Changes - MILWAUKEE business delivered an 11.2% sales growth in local currencies, maintaining its position as the global 1 professional tools brand [5] - RYOBI outperformed the market with mid-single-digit sales growth, driven by strong performance in the Outdoor division [5] Market Data and Key Metrics Changes - The company reported strong market share gains across its business lines, particularly in the cordless tools segment [3] - The effective tax rate was at 7.3%, slightly higher than the previous year's 6.9% [8] Company Strategy and Development Direction - The company continues to focus on strategic investments in new product development, technology, and geographic expansion [7] - Emphasis on maintaining a strong culture and investing in talent to drive future growth [18][19] - The company aims to reduce inventory levels further, targeting below 100 days [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate market conditions, focusing on large projects and verticals that continue to thrive despite slowdowns in residential and commercial construction [62] - The leadership team highlighted the importance of innovation and customer focus as key drivers of success [14][15] Other Important Information - The Board declared an interim dividend of HKD 0.108 per share, an increase of 13.7% over last year [7] - Total gross debt reduced by USD 1.15 billion or 39% compared to the first half of 2023 [12] Q&A Session All Questions and Answers Question: Concerns about the second half outlook given macro changes - Management reassured that despite slowdowns in certain sectors, large projects and other verticals continue to flourish, providing confidence for the second half [62]

Core Insights - Techtronic Industries Co. Ltd. (TTI) reported strong financial performance for the first half of 2024, with sales reaching US$7.3 billion, a 6.3% increase compared to the same period in 2023 [2][3] - The company's net profit increased by 15.7% to US$550 million, reflecting effective cost management and operational efficiency [2][3] - TTI's gross margin improved by 67 basis points to 39.9%, indicating enhanced profitability [2][3] Financial Performance Highlights - Revenue for the first half of 2024 was US$7,312 million, up from US$6,879 million in 2023, marking a 6.3% increase [3] - Gross profit margin rose to 39.9% from 39.3% in the previous year [3] - Earnings Before Interest and Taxes (EBIT) increased by 11.8% to US$626 million [3] - Earnings per share (EPS) grew by 15.8% to US30.12 cents [3] - Free Cash Flow reached a record US$508 million, an increase of US$207 million from the first half of 2023 [3] Segment Performance - The Power Equipment segment achieved sales growth of 7.1% in local currency, totaling US$6.9 billion [4] - The MILWAUKEE brand experienced double-digit sales growth of 11.2% in local currency [4] - The Consumer group, particularly RYOBI, showed mid-single digit sales growth, while the Floorcare and Cleaning business maintained revenue of US$428 million [4] Dividend Declaration - An interim dividend of HK108.00 cents (approximately US13.90 cents) per share was declared, up from HK95.00 cents (approximately US12.23 cents) in 2023 [5] Leadership and Strategy - Steven Philip Richman was appointed as CEO on May 21, 2024, succeeding in a leadership role to drive the company's growth strategy [2][6] - The company emphasizes investment in innovative products and exceptional talent to maintain its market leadership [7]

Summary of Conference Call Company or Industry Involved - The conference call pertains to Xingye Securities Core Points and Arguments - The content of the conference call is exclusively for the clients of Xingye Securities and is protected by copyright laws [1] - Any reproduction or distribution of the meeting content without authorization from Xingye Securities is considered an infringement [1] - Participants are reminded not to disclose insider information or any material non-public information [1] Other Important but Possibly Overlooked Content - The call emphasizes the importance of confidentiality and legal compliance regarding the information shared during the meeting [1]

Summary of Conference Call Company or Industry Involved - The conference call pertains to Xin Ye Securities, focusing on its client meeting audio and text records Core Points and Arguments - The content copyright of the conference call is owned by Xin Ye Securities, and any retention of the content must be approved by the company [1] - Unauthorized reproduction or forwarding of the meeting content is considered infringement, and Xin Ye Securities reserves the right to pursue legal action [1] - All participants in the conference call are prohibited from disclosing insider information or any significant unpublished information [1] Other Important but Possibly Overlooked Content - The call emphasizes the importance of confidentiality and legal compliance regarding the information shared during the meeting [1]

Core Viewpoint - Techtronic Industries Company Limited is rated as a Buy due to positive developments including a new CEO, share buybacks, and favorable interest rate outlook [2][8]. Group 1: Leadership Transition - Steven Richman has been appointed as the new CEO, replacing Joseph Galli, and brings over three decades of relevant industry experience [14]. - Richman has been with Techtronic Industries for 17 years and previously led the Milwaukee professional power tool business, achieving a double-digit CAGR from 2007 to 2023 [9][14]. Group 2: Share Buybacks - The company repurchased 250,000 Hong Kong-listed shares at an average price of HK$94.13 on June 20, 2024, spending approximately HK$217 million on buybacks year-to-date [10]. - 80% of the buybacks occurred in the last month, indicating an opportunistic approach to repurchasing shares during price declines [10]. - The anticipated shareholder yield for FY 2024 could improve to 2.5% when factoring in buybacks, compared to a dividend yield of 2.2% alone [10]. Group 3: Interest Rate Outlook - Recent economic indicators suggest a potential for Federal Reserve interest rate cuts, which could lower interest expenses for Techtronic Industries, as 40% of its borrowings are floating rate debt [5]. - A decrease in interest rates is expected to boost demand for the company's power tools and outdoor equipment, positively impacting future earnings [5][7]. Group 4: Valuation Comparison - Techtronic Industries' current normalized P/E ratio of 19 is lower than Home Depot's 23, indicating a potential for valuation convergence as investor confidence grows [7]. - The valuation multiples for both Techtronic Industries and Home Depot are likely to expand in light of the new CEO's capabilities and the positive outlook on interest rates [7].