Core Viewpoint - Morgan Stanley's report indicates that despite tariff and macroeconomic uncertainties, Techtronic Industries (00669) demonstrates growth resilience through vertical application expansion, channel cooperation enhancement, and capacity diversification, thus maintaining an "overweight" rating [1] Group 1: Financial Forecasts - Due to changes in tariff policies leading to supply chain restructuring, revenue growth is expected to slow in the second half of the year [1] - Morgan Stanley has revised Techtronic's sales forecasts for 2025, 2026, and 2027 down by 2%, 3%, and 4% respectively [1] - The annual profit forecast has been adjusted down by 6%, 8%, and 9% to reflect the uncertain outlook [1] Group 2: Target Price Adjustment - The target price for Techtronic has been reduced from HKD 124 to HKD 115 [1]

Core Viewpoint - Morgan Stanley maintains an "overweight" rating for Techtronic Industries (00669), highlighting its resilience in growth despite tariff and macroeconomic uncertainties through vertical application expansion, channel cooperation enhancement, and capacity diversification [1] Group 1: Financial Forecasts - Morgan Stanley has adjusted its sales forecasts for Techtronic for 2025, 2026, and 2027 down by 2%, 3%, and 4% respectively, reflecting uncertainties in the outlook [1] - The annual profit forecast has been revised down by 6%, 8%, and 9% for the same periods, indicating a cautious approach due to potential impacts from changing tariff policies and a high-interest environment [1] Group 2: Target Price Adjustment - The target price for Techtronic has been reduced from HKD 124 to HKD 115, aligning with the revised forecasts and the anticipated slowdown in revenue growth in the second half of the year [1]

Group 1 - The article focuses on the Asia Value & Moat Stocks research service, which targets value investors looking for Asia-listed stocks with significant discrepancies between price and intrinsic value [1] - The service emphasizes deep value balance sheet bargains, such as net cash stocks and low price-to-book (P/B) stocks, as well as wide moat stocks that represent high-quality businesses [1] - The author provides a range of watch lists with monthly updates, specifically concentrating on investment opportunities in the Hong Kong market [1]

Group 1 - The core viewpoint of the report is that Techtronic Industries (00669) is expected to maintain its core growth model due to its strong balance sheet and cash position, as well as its first-mover advantage in global supply chain diversification [1] - Morgan Stanley believes that Techtronic Industries has the capability to navigate economic uncertainties, supported by its track record of outperforming peers [1] - The report highlights that Techtronic Industries has shown robust performance in the first half of the year, significantly leading its industry peers, and the management remains optimistic about the company's development prospects beyond 2026 [1]

Summary of Techtronic Industries (0669.HK) Earnings Review Company Overview - **Company**: Techtronic Industries (TTI) - **Ticker**: 0669.HK - **Industry**: Power Tools and Equipment - **Market Size**: US$39 billion global power tool market in 2024 Key Financial Results (1H25) - **Revenue**: US$7,833 million, up 7% year-over-year (yoy) [1] - **Operating Profit**: US$2,921 million, up 14% yoy [1] - **Net Profit**: US$550 million, up 14% yoy [1] - **Gross Profit Margin**: 40.3%, an increase of 0.3 percentage points (pp) yoy [1] - **Operating Margin**: 9.0%, an increase of 0.5 pp yoy [1] - **Net Profit Margin**: 8.0%, an increase of 0.5 pp yoy [1] Segment Performance - **Power Equipment Revenue Growth**: +7.9% yoy [1] - **Floor Care & Appliances Revenue Growth**: -4.6% yoy [1] - **Geographical Performance**: - North America: +8% yoy - Europe: +12% yoy - Rest of the World (ROW): +6% yoy [1] - **Brand Performance**: - Milwaukee: +12% yoy - Ryobi: +9% yoy [1] Management Insights - **Long-term EBIT Margin Target**: Management reiterated a target of 10% [2] - **2H Growth Moderation**: Anticipated due to self-imposed shipping reductions for certain Milwaukee SKUs produced in China [2] - **China Capacity**: Expected to support non-US markets still growing at double digits [2] Tariff Mitigation Strategies - **Production Shift**: Over 95% of Ryobi production for the U.S. market has shifted to Vietnam, now subject to a 20% tariff [10] - **Milwaukee Production**: Less than 15% of total sales involve China-to-U.S. exports, with a full relocation targeted by the end of 2025 [10] - **Cost Management**: TTI has implemented selective price increases and other cost-cutting measures to maintain profitability [6] Financial Outlook - **Earnings Outlook Revision**: 2025E-2030E earnings outlook revised up by 5-8% mainly due to margin improvements [3] - **12-Month Price Target**: Updated to HK$110.1 based on a 2026E P/E of 19x [3] - **Dividend Payout Ratio**: Expected to increase to close to 50% [7] Risks and Considerations - **Downside Risks**: - Slowdown in U.S. businesses/residential fixed asset investment (FAI) - Slower product innovation - Changes in international trade/tax policy - U.S.-China tariff impacts [12] Additional Insights - **Cash Flow and Balance Sheet**: Strengthened with a net cash position of 3% to equity at the end of 1H25 [7] - **Market Position**: TTI's strong pricing power and market leadership in cordless tools are expected to drive growth despite tariff challenges [11] This summary encapsulates the key financial metrics, management insights, and strategic outlook for Techtronic Industries, highlighting both opportunities and risks in the current market environment.

Investment Rating - The investment rating for the company is "Buy" (maintained) [1][5] Core Views - The company is expected to achieve accelerated performance growth in 2026 due to the completion of overseas capacity relocation by the end of 2025, which will fully cover shipments to the U.S. market [5][7] - The company has adjusted its net profit forecasts for 2025-2027 from $1.35 billion, $1.63 billion, and $1.94 billion to $1.29 billion, $1.56 billion, and $1.84 billion, reflecting year-on-year growth rates of 14.7%, 21.4%, and 17.9% respectively [5][6] - The company's core brands, Milwaukee and RYOBI, continue to show strong growth, with Milwaukee achieving a year-on-year increase of 11.9% and RYOBI 8.7% in the first half of 2025 [6][7] Financial Summary and Valuation Metrics - Revenue for 2025 is projected at $15.52 billion, with a year-on-year growth of 6.1% [8] - Net profit for 2025 is estimated at $1.29 billion, reflecting a year-on-year increase of 14.7% [8] - The gross margin is expected to improve to 40.6% in 2025, while the net margin is projected at 8.3% [8] - The diluted EPS is forecasted to be $0.7 for 2025, with a P/E ratio of 17.3 times [8]

Core Insights - The company reported strong performance in H1 2025, with revenue of $7.833 billion (yoy +7.1%) and net profit of $628 million (yoy +14.2%), achieving a net profit margin of 8.0% (yoy +0.5pct) [1][2] - Growth was driven by strong sales of flagship brands Milwaukee and RYOBI, an increase in high-end brand revenue share, and strategic reduction of non-core business investments [1][2] - The company maintains a "buy" rating due to the expected continued growth of Milwaukee and RYOBI brands and a solid long-term growth logic [1] Business Performance - The electric tools segment generated $7.425 billion in revenue (yoy +7.9%), with Milwaukee's revenue growing by 11.9% and RYOBI's by 8.7% [1] - The floor care and cleaning segment saw revenue of $408 million (yoy -4.8%), but operating profit increased by 3.6% to $97 million, attributed to a shift from AC to rechargeable products and reduced non-essential spending [1] - North America and Europe are core markets, with revenues of $5.872 billion and $1.401 billion respectively, both showing steady growth [1] Profitability and Efficiency - The company's gross margin for H1 2025 was 40.3% (yoy +0.3pct), benefiting from a higher proportion of high-margin businesses and improved operational efficiency [2] - Total operating expenses were $2.452 billion (yoy +6.5%), with a period expense ratio of 31.3% (yoy -0.2pct) [2] - Management expenses decreased due to enhanced operational efficiency, while R&D expenses increased due to higher investment in new products and technologies [2] Competitive Advantages - The company holds a leading position in the electric tools and outdoor power equipment (OPE) market, with a diverse portfolio of 13 sub-brands catering to various consumer needs [2] - The company has a global production footprint, with 39% of capacity in China and significant operations in Vietnam, the U.S., and Mexico, allowing it to respond flexibly to tariff disruptions [2] Financial Forecast and Valuation - The company maintains profit forecasts for 2025-2026 and introduces a forecast for 2027, expecting net profits of $1.293 billion, $1.473 billion, and $1.737 billion respectively, with corresponding EPS of $0.71, $0.80, and $0.95 [2] - The target price is set at HKD 132.59, with a target PE of 24 times for 2025, reflecting the company's strong market position and profitability improvements [2]

Core Insights - The company reported a revenue of $7.833 billion for the six months ending June 30, 2025, representing a year-on-year increase of 7.1% [1] - Shareholder profit reached $628 million, up 14.2% year-on-year, with basic earnings per share at 34.37 cents [1] - A mid-term dividend of 1.25 HKD is proposed [1] Financial Performance - Gross margin increased by 34 basis points to 40.3%, reflecting the company's focus on enhancing the profitability of consumer brands and improving operational efficiency [1] - The Milwaukee business grew by 11.9% in local currency, while Ryobi saw an 8.7% increase [1] - Free cash flow for the first half of 2025 reached $468 million, with the company ending the period in a net cash position [1] Strategic Focus - The company strategically reduced sales in non-core businesses compared to the first half of 2024, aiming to streamline its product portfolio and enhance profitability in these areas [1]

公司在垂直市场扩展方面取得突破性进展，成功从运输维修领域延伸至矿业领域。M18FUEL无碳刷1寸 D型手柄短头高扭力冲击扳手等产品的成功应用，展现了创科实业跨领域拓展的能力。这种垂直增长策 略不仅提升了产品附加值，也为公司在澳洲、拉丁美洲等矿业发达地区的全球扩展提供了有力支撑。 创科实业2025年上半年录得78亿美元销售额，同比增长7.1%，核心品牌MILWAUKEE和RYOBI均实现 强劲增长。公司毛利率提升至40.3%，除利息及税项前盈利增长13.3%至7.09亿美元，净利润增长14.2% 至6.28亿美元。期内公司实现4.68亿美元正自由现金流，财务状况稳健。 核心品牌表现强势，垂直市场拓展成效显著 MILWAUKEE品牌在2025年上半年录得11.9%的双位数增长，各区域表现均衡，北美业务增长12.9%， 欧洲业务增长11.6%，其他地区增长2.6%。该品牌的户外园艺工具和个人安全装备业务表现尤为突出， 超越产品组合平均水平。公司通过深入了解用户需求，针对机械、电气、通渠、装修等多个垂直领域开 发专业化产品。 创科实业对未来发展前景保持乐观态度。公司凭借自2015年以来超过19亿美元的产能投资，建立了 ...

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 132.59 [6][5]. Core Insights - The company reported strong performance in H1 2025, achieving revenue of USD 7.833 billion (yoy +7.1%) and a net profit of USD 628 million (yoy +14.2%), with a net profit margin of 8.0% (yoy +0.5pct) [1][3]. - Growth is driven by flagship brands Milwaukee and RYOBI, with a strategic focus on high-end brands and improved operational efficiency [1][4]. - The company is positioned as a global leader in electric tools and outdoor power equipment (OPE), benefiting from a diversified global production capacity to navigate trade challenges [1][4]. Revenue Performance - The electric tools segment generated USD 7.425 billion in H1 2025, up 7.9% yoy, with Milwaukee's revenue increasing by 11.9% and RYOBI's by 8.7% [2]. - The floor care and cleaning segment saw revenue decline to USD 408 million (yoy -4.8%), but operating profit increased by 3.6% to USD 9.7 million due to a shift towards rechargeable products [2]. Profitability Analysis - The company's gross margin for H1 2025 was 40.3% (yoy +0.3pct), attributed to the higher contribution from profitable brands and improved operational efficiency [3]. - Total operating expenses were USD 2.452 billion (yoy +6.5%), with a corresponding expense ratio of 31.3% (yoy -0.2pct) [3]. Brand and Technology Advantage - The company has a strong brand and technological edge, with 13 sub-brands catering to various consumer segments and a commitment to lithium battery upgrades [4]. - Global production facilities are strategically located, with 39% of capacity in China and significant portions in Vietnam, the US, and Mexico, allowing flexibility in response to tariff disruptions [4]. Earnings Forecast and Valuation - The company’s net profit is projected to be USD 1.293 billion, USD 1.473 billion, and USD 1.737 billion for 2025, 2026, and 2027 respectively, with corresponding EPS of USD 0.71, USD 0.80, and USD 0.95 [5][10]. - The report assigns a target PE of 24x for 2025, reflecting the company's leading position and consistent profitability improvements [5][10].