CNBC’s Sara Eisen sits down with Nike CEO Elliott Hill to discuss the company’s strategy, outlooks on the consumer, and timeline for a business turnaround. ...

Core Viewpoint - Tongda is expected to recover earnings in 1H25 with projected revenue of HK$2,802 million and net profit of HK$59 million, reflecting a year-on-year decrease in revenue and a significant increase in net profit due to prior losses from business restructuring and impairment provisions [1][2] Group 1: Financial Performance - The estimated revenue for 1H25 is HK$2,802 million, representing a 6% decrease year-on-year, while net profit is projected to increase by 359% year-on-year [2] - Excluding disposed business, Tongda's revenue is expected to grow by 13% year-on-year in 1H25, driven by consumer electronics and household & sports goods [1] - Gross profit margin (GPM) is anticipated to improve to 15.7% in 1H25 compared to 15% in 1H24 [1] Group 2: Business Outlook - The outlook for 2H25 and 2026 is positive, with expected order wins from Samsung and Huawei, increased adoption of glass fiber casing, and momentum in Smart Tech [3] - The smartphone casing segment is projected to benefit from order wins and glass fiber casing adoption, while Smart Tech is expected to see growth from new projects with Ikea and increased capacity in Malaysia [3] - Home appliances are forecasted to experience stable single-digit growth driven by orders from Midea, Haier, and Xiaomi, and networking is set to ramp up with new orders at the Vietnam plant starting from 3Q25 [3] Group 3: Valuation and Investment Recommendation - The recommendation to maintain a BUY rating is based on solid earnings recovery and attractive valuation metrics [4] - The new target price (TP) is set at HK$0.123, reflecting a higher P/E ratio of 6.6x for FY25E, which is still at a 30% discount to the 10-year average forward P/E of 9.0x [4] - The stock is considered undervalued, particularly due to its 66.2% shareholding in the A-share subsidiary Tongda Smart Tech and a net cash position of HK$635 million for FY24 [4]

Financial Data and Key Metrics Changes - Consolidated net sales from continuing operations for Q1 were $485 million, down 3% year over year, and essentially flat on an organic basis [23] - Adjusted EBITDA from continuing operations was $37.2 million, down 19% from $45.8 million in the prior year [23] - Net debt at the end of the quarter was $1.04 billion, with a net leverage ratio of 4.7 times [27][28] Business Line Data and Key Metrics Changes - In the Filtration and Advanced Materials (FAM) segment, net sales were $188 million, down more than 7% year over year, reflecting lower volumes and unfavorable currency translation [24] - The Sustainable and Adhesive Solutions (SaaS) segment saw net sales of $297 million, up almost 6% on an organic basis, with adjusted EBITDA performance of $33 million, up more than 3% year over year [25][26] Market Data and Key Metrics Changes - Demand patterns reflected in Q1 showed sales were flat organically year over year, with SaaS segment growth offset by softness in FAM results, particularly in automotive and construction end markets [16][17] - Less than 7% of annual sales are currently subject to tariff exposure, indicating a strong localized supply chain [19][20] Company Strategy and Development Direction - The company is focusing on three near-term priorities: enhancing commercial execution, deleveraging the balance sheet, and conducting a strategic review of its portfolio [9][34] - A task force is reviewing cost and operating structures to achieve additional cost reductions of $10 million to $15 million in 2025, alongside previously announced reductions [13][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a continuously suppressed demand environment and the need for operational improvements [6][8] - There is an expectation for a significant sequential step up in adjusted EBITDA performance in Q2, driven by increased volume and improved pricing [30] Other Important Information - The company plans to reduce capital expenditures to $40 million per year, down from $55 million in 2024, and aims to lower inventory levels by $20 million to $30 million in 2025 [14][29] - A goodwill impairment analysis resulted in a pretax non-cash charge of $412 million due to sustained decline in share price [27] Q&A Session Summary Question: Insights on the portfolio review - Management is evaluating how each product category contributes to the bottom line and overall portfolio diversity, with updates to be provided as progress is made [39][40] Question: Timing for cash flow generation improvements - Significant cash flow increases are expected in Q2, driven by inventory reductions and improved sequential EBITDA [42][43] Question: Margin contraction causes and dividend policy - Management identified that margin suppression is primarily due to the FAM business and is working towards improving margins through cost reductions and pricing actions [49][50] - The decision to continue paying dividends has been discussed with the board, and the current plan is to maintain the dividend [54]